The latest hot topic for Chinese ecommerce players, which is currently receiving a lot of attention from world leading brands and retailers, is cross-border ecommerce. Cross-border ecommerce allows Chinese customers access to the best products from around the world without even leaving their homes!
Huge demand, in excess of 100bn yuan, for goods from countries such as the UK and US has meant a significant growth in the number of online marketplaces in China.
Purchases on cross-border e-commerce platforms last year doubled in size compared to 2014, meaning 20% of Chinese buyers bought from overseas. However, increased custom regulations and increased taxes may signal an inflexion point. The trigger for this tipping point has been further regulations announced by the Government. These regulations cover a vast range of areas, including tax, manufacturing standards, safety and logistical. Many of these new laws are not yet fully defined; this has, in turn, led to increased speculation about what is to come.
In recent news, it has been thought that a one year grace period (until May 2017) will be allowed until full implementation of the new laws is imposed. It is considered highly likely that after this time the operating costs and entry barriers for cross-border e-commerce will likely rise.
Earlier this year Beijing rolled-out a new tax implication for cross-border e-commerce which would incur consumers with a possible 70 per cent charge for VAT. Prior to this introduction, this charge was only applicable to wholesalers.
A step up in parcel inspections was also ordered by the State Council on the country’s customs and tax agencies, whilst not necessarily about content, it is to ensure that the appropriate tariffs and taxes were being paid.
A recent report by consultancy firm Oliver Whyman entitled “Shopping without Boundaries” highlighted that Haitao (the cross-border trade propelled by demand) had most likely reached a “tipping point” and that a plan B needs to be considered by the marketplace.
Most would consider that the Chinese customers are the most enlightened and digitally savvy in the world today. This has come about through their love of travel and a keen interest in offline prices abroad.
The report also highlighted that whilst these changes were significant, it was agreed that the cross-border e-commerce marketplace still provides fantastic opportunities for international companies. Alongside this it also allows new businesses to create a much faster presence than more traditional channels and to take fewer financial risks.
The companies that would gain the most from these changes to the Chinese e-commerce market are those with an in-depth knowledge of consumer desires, companies who continue to be creative and unique with their business models and who can remain responsive to market changes.
The full report also highlights how new brands should revise their strategic approach to the Chinese cross-border ecommerce. It would be good business sense to define what role these regulations should play in their business. Also new entrants need to continue to provide Chinses shoppers with what they desire