Move over brick-and-mortar; the largest e-commerce market in the world is open for business.
Increasingly, Chinese consumers are hungry for international goods—and they’re shopping for them online. According to a new report from Fung Global Retail & Technology, cross-border e-commerce is the next boom to boost online sales—and it could provide an easier entree into the market than physical stores.
“By selling through [cross border e-commerce], international retailers can reach Chinese shoppers regardless of whether the retailers have a physical presence in China,” said Deborah Weinswig, managing director of Fung Global Retail & Technology
The report, entitled “International Retailers’ Guide to Cross-Border E-Commerce in China,” states cross-border e-commerce (CBEC) volumes grew by 39 percent in 2015, despite a 13 percent decline in physical imports over the same period. And the trend is expected to continue.
Online imports in China are expected to hit $245 billion by 2020, according to findings by Accenture and AliResearch. If these projections prove accurate, China will be the largest cross-border B2C market.
The biggest driver behind this push? The country’s rising middle class.
In addition to having more disposable income, these consumers are more sophisticated, aware of international brands and tech savvy, the report claims. A recent McKinsey & Company survey even suggests these shoppers are looking for pricey goods and those that are elusive in their home country.
While these shoppers may be willing to splash out on better products, they don’t want to be overcharged. Hence the turn to online.
Just as they’ve always purchased luxury goods abroad to skirt hefty price tags weighed down by import duties, shopping online from overseas merchants allows them to sidestep those inflated prices. The price difference, according to the Fortune Character Group, can be between 20 percent and 30 percent. That’s reason enough to click and ship even with the newly instituted sales tax on goods purchased online from overseas.
In addition to price, the report cites Chinese consumers’ higher confidence in the authenticity and quality of goods purchased from an overseas company. The government is providing additional assurances by placing more regulations on counterfeits and easing customs clearance for overseas goods. According to the Boston Consulting Group, a quarter of China’s population will shop either directly on foreign sites or through third parties in 2020, up from 15 percent in 2016.
But before a brand can tap into this sought-after consumer base, it must devise a strategy for getting up and running. Just like with a physical store launch, planning could mean the difference between success and failure.
Options include working with a third-party, selling through a distributor or selling directly from the brand’s own site using transnational logistics for delivery. Third-party providers, in particular, are attractive to sellers like Macy’s and Shiseido because they specialize in cross-border e-commerce and allow brands to open storefronts they can manage themselves. Platforms like this, including Alibaba’s TMall Global, are attractive to shoppers as well because they provide added security and service, like policing of illegal goods. Alibaba alone attracts 440 million active users shopping the millions of businesses on the site, according to Forbes.
“In order to succeed in the Chinese market, international retailers are advised to have a strategic plan for CBEC which complements their existing China strategy,” Weinswig said. “International retailers will need to decide which cross-border channels to sell on, driven by considerations of each platform’s targeted clientele and product category, costs, track record and suite of value-added services.”