Focus on China: a Cross-Border eCommerce Perspective.
“Compared to traditional ways of online commerce, cross-border eCommerce involves many third parties, making it a very unconventional process, distinct from the regular cargo shipments. Looking at Europe and China, cross-border eCommerce flows go both ways: from China to Europe usually, parcels from marketplaces are shipped while from Europe to China, mostly milk powder, luxury goods, and fashion items. The proportion of exports in China’s cross-border e-business is substantially higher than imports. This emphasizes the size of the worldwide market for Chinese goods, and also the importance of Chinese cross-border e-commerce in exports.”
- Global e-commerce sales are expected to exceed US$4.9 trillion in 2021
- Chinese cross-border eCommerce imports and exports surged by 20% YOY in the first nine months of 2021
- Many Chinese businesses have realized the value of having a local presence and better delivery forecasting. More than 1.900 warehouses have been developed by Chinese enterprises outside of China
- Chinese online consumers buy goods mostly on a third-party websites, rather than from independent eCommerce websites
Using the latest technology and innovation, businesses seek new ways to reach out to customers, focusing on developing their brands in overseas markets. And the best example is China, where cross-border eCommerce has been booming in the past few years.
Despite several obstacles such as rising basic material costs, delayed international logistics, and EU VAT reform, cross-border eCommerce in 2021 won a significant triumph in China. Stay-at-home regulations have taken a considerable toll on physical shopping since 2020. Customers worldwide have become increasingly used to internet purchasing due to the COVID-19 pandemic.
China’s cross-border e-commerce businesses have taken advantage of the opportunity and are experiencing significant success. Imports and exports totalled 1.69 trillion yuan in 2020, up 31.1 percent year on year, according to figures from the General Administration of Customs. In the first three quarters of 2021, cross-border e-commerce trade surged by 20.1 percent year on year.
Domestic and cross-border spending has soared quickly since Chinese consumers have been unable to go overseas for nearly two years. Along with growing consumption, Chinese consumers have turned to international brands seeking a taste of something different than what they may get on their domestic travels. During the pandemic, Chinese cross-border e-commerce platforms were clear winners, with more worldwide businesses joining their platforms. Regardless of the COVID-19 pandemic’s influence on global economic development in 2020, the benefits of cross-border e-commerce were clear for everyone. The widespread adoption of online consumption patterns has accelerated the growth of the worldwide e-commerce retail business. Global e-commerce sales are expected to exceed US$4.9 trillion in 2021, according to eMarketer, growing at a compound annual growth rate of 20.8 percent from 2018 to 2021. At the same time, China’s cross-border e-commerce has emerged as a new economic accelerator given the satisfying cost-to-performance results.
Although global logistics faced various obstacles in 2021, Chinese cross-border eCommerce imports and exports surged by 20% YOY in the first nine months of 2021. Companies are still learning how to develop abroad and keep the dots linked since cross-border eCommerce is relatively new. One of the few variables that disrupted global supply chains were price and capacity volatility, data quality, and delivery predictability. Many Chinese businesses have realized the value of having a local presence and better delivery forecasting. More than 1.900 warehouses have been developed by Chinese enterprises outside of China, primarily in North America, Europe, and Asia. This trend will grow in the next few years as sellers want to guarantee deliveries and have a better grasp of the local market.
From an import perspective, there are many ways brands can sell to Chinese customers: independent online stores outside China, marketplaces, eCommerce storefronts, or WeChat stores. In the absence of a Chinese business license, these ways are beneficial for foreign brands. Looking from a customer perspective, Chinese online consumers buy goods mostly on a third-party websites, rather than from independent eCommerce websites. Only companies with a Chinese unit can open shops on B2C platforms. The requirement to open a cross-border eCommerce website is to have a company with a foreign entity. Cross-border eCommerce retailers without a Chinese physical brand can sell products to China via hosted websites outside China.
Chart 1. In China, e-commerce user profiles shifted during the coronavirus outbreak. E-commerce user profiles before and during COVID-19 crisis in China, % // Source: McKinsey Study. Understanding Chinese Consumers: Growth Engine of the World, 2020
For foreign brands, the easiest way to sell is via marketplaces due to the high traffic volume to the website. The disadvantage is that platform costs are high, and companies should expect fierce competition. Setting the groundwork for product demand through online seeding and other brand awareness strategies is critical for creating early wins, regardless of the third-party e-commerce site.
Which are the two logistics model for shipping in China?
There are two basic logistic models for shipping, storing, packing, and delivering items: Bonded Warehouses and Direct Fulfillment.
- Bonded warehouses – areas, buildings or warehouses located in special areas called Free Trade zones. Products can be imported or re-exported overseas from the bonded zones without any involvement from Chinese customs, nor carrying any import duties. As a result, shippers may send large quantities of products ahead of time and store them in these warehouses. When clients purchase products online, the shipper’s team or a third-party logistics provider may pick, pack, and clear customs using three documents: the online order, the payment transaction, and the logistics order. The merchandise can then be delivered to the consumer via a local express provider. Benefits include a faster registration, more efficient processes, faster customs clearance, and the ability for shippers to move goods between these areas and overseas without paying duties and taxes in China until the product gets sold locally.
- Direct fulfillment – for international companies and sellers, it’s a more typical fulfillment strategy. After a consumer places an order online, the shipper packs, and ships the product from a foreign warehouse. The shipper has to provide the data for customs clearance, in order to speed up the process. There are no fees when shipping the products for storage.
heyworld GmbH was established in 2019, as a 100% subsidiary of Lufthansa Cargo, specialized in cross-border, eCommerce logistics. heyworld translates airfreight processes and standards into the eCommerce world (ex. conversion of chargeable weight into a parcel level-based pricing scheme). We combine airfreight, eCommerce, and logistics know-how, working with a modular service, from first mile, middle mile (air freight) to end mile. We are well Integrated into Lufthansa handling process, and connected to all service providers and process steps via API integration.
Contact us now, and learn how we can help you ship your cross-border eCommerce products to China!
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