China is by far the number one country for ecommerce, with an expected revenue of nearly $1.5 Trillion in 2022. And this is only expected to grow, thanks to the proliferation of new cross-border ecommerce (CBEC) policies and methods that make it easier than ever for Chinese consumers to get their hands on desirable overseas brands.
In this guide, we’ll take you through the history of CBEC in China, how it transformed the world of ecommerce, and how you can make use of this exciting new frontier to get your products into the hands of millions of eager Chinese consumers.
What is cross-border ecommerce?
Cross-border ecommerce is a type of online shopping in which the buyer and seller are in different countries.CBEC is growing as more people shop online, and it’s especially popular among people who live in less-developed countries and don’t have access to certain desirable international brands and products.
The increasing prevalence in CBEC can be attributed to a number of factors including:
- An increase in global trade
- Easy access to information about what products are available abroad
- An increase in purchasing power among a growing consumer class that desires higher quality and trendy products from overseas
- Websites, apps and other ecommerce tech that connect millions of consumers with thousands of brands; make online buying and selling easier; and offer seamless payment processing and inventory control for companies and brands
- An increasing desire among companies and brands to reach more markets
With China representing the largest untapped market by far, and because of that country’s proactive commitment to facilitate this type of trade, the term cross-border ecommerce has come to be increasingly associated with the sale of foreign brands in this country in particular.
That’s not to mean it doesn’t apply to other countries, but it does mean China is an excellent case study of how regulated, cross-border trade occurs in the form of CBEC.
And that’s what this guide will focus on.
A short history of cross-border ecommerce in China
The earliest CBEC prototype can be traced back to the early 2000s, when more and more Chinese citizens began studying, working, and traveling abroad. Some of these expats noticed an opportunity to purchase foreign goods and sell them to family and friends back home. They became known as ‘daigous’, or professional shoppers. But lack of regulation made this practice neither reliable nor sustainable for brands.
In 2007, Chinese ecommerce giant Taobao sensed an opportunity to capitalise on the popularity of foreign brands, and launched Taobao Global to facilitate and scale CBEC through official channels. However, the regulatory landscape was still stuck in the pre-digital world – making the entire process cumbersome.
The industry stagnated until 2014, when two major events took place. First, through a series of small policy changes, the Chinese government officially recognised the burgeoning CBEC model. Second, Chinese tech giant Alibaba launched Tmall Global, the first CBEC ecommerce platform in China.
Over the following several years, the new CBEC model began to take shape. In 2019, just in time for the pandemic and the digital shopping explosion that followed, China finally standardised the CBEC model with a wide-ranging policy overhaul.
These consistent improvements to the CBEC model has allowed the industry to continue to grow year after year – and it’s only the beginning.
What is a cross-border ecommerce platform?
In the context of China, a cross-border ecommerce platform is an online marketplace that connects Chinese buyers with overseas sellers. The most prominent of these is Tmall Global. You can think of it like eBay or Amazon, but with a couple of key differences:
- It’s a one-way flow of goods. The whole purpose of a CBEC platform is to allow foreign brands to sell products directly to Chinese consumers. That means it’s a one-way flow of goods, from overseas markets to China.
- It’s a path to customs clearance. Being approved to sell on a CBEC platform helps you clear a lot of customs hurdles. It means more paperwork upfront, but less later on.
- You can have a stronger brand presence. In China, consumers prefer to do all their online shopping through third-party platforms rather than directly from brands. As a result, CBEC platforms allow brands to develop a more customised brand experience than a site like eBay or Amazon.
We’ll discuss specific CBEC platforms in detail later in the guide.
What products can I sell via CBEC?
You’d be surprised at the large number of products you can legally import to China under the cross-border ecommerce framework.
Common product categories include:
- Beauty and cosmetic products
- Health care products
- Vitamins, supplements and nutritional products
- Baby products
- Dry food, spices and oils
- Beer, wine and other beverages
- Fashion and luxury goods
- Some dairy and cheese products
What is the CBEC Positive List?
The term Positive List refers to a full list of permitted items you can import via cross-border ecommerce channels. The folks over at EU SME Centre translated the full list of permitted items, including any special regulatory requirements for each, and you can find that translation here.
How do you import your goods to China?
Under the new regulatory environment, there are typically two ways you can import your goods to China, and the one you choose depends on a number of factors including the type of product you’re selling and how much volume you’re moving.
The two methods for importing your goods to China:
- Bonded import mode. You send your goods in bulk to China and store them in a Chinese warehouse located in one of China’s special administrative zones. A Chinese customer purchases your product through Tmall Global or other CBEC platform. The CBEC platform will declare the order with customs, customs will inspect the items, and the cleared items will be dispatched directly to the consumer upon clearance.
- Direct purchase import mode. You store your product outside of China, such as in your country or the country where the product is manufactured. The customer places an order through a CBEC platform, which then declares the order with customs. You dispatch the goods from the overseas warehouse, using international logistics services, to designated CBEC sites in China. After customs inspects and clears the items, they’re dispatched to the customer.
Should I store my products in China using the bonded warehouse mode?
When you first start out on your CBEC journey, you’ll probably want to use the direct purchase import mode, and hold off on using Chinese warehouses to store your products. At least until you have a detailed enough forecast into your future sales.
But once you’re already up-and-running, and your forecast shows continued demand for your product, having a warehouse can not only save you time and shipping costs, but it can also increase customer satisfaction due to shorter shipping times.
Chinese cross-border ecommerce taxes and customs regulations
Goods on the Positive List don’t require an import license and are processed through customs much quicker than other items.
Additionally, there are a lot of tax benefits that come along with selling goods via CBEC channels.
Imports of less than RMB 5,000 in a single transaction and more than RMB 26,000 annually are duty-free, with a VAT and consumption tax (CT) levied at only 70% of the normal rate.
Amounts above these limits will be subject to all general import taxes including tariff, VAT and CT.
A parcel tax could also apply to goods mailed into the country by individuals and when customs can’t access the electronic information about the item. But a reputable CBEC agency can help you avoid this issue by getting your brand properly registered on CBEC marketplaces like Tmall Global.
What are the major CBEC platforms in China?
The growing popularity of western products, combined with the Chinese Government’s favourable CBEC policies, means there’s no shortage of platforms trying to get in on the action.
However, Tmall Global still remains the clear market leader, a trend that is unlikely to change any time soon – especially with its acquisition of the #2 platform, Kaola, in 2019.
Let’s look at the top three in more detail.
Tmall Global is the international version of Tmall, which is the 3rd most visited website in the world, and the 1st most visited site in China. Tmall Global was spun off from the domestic-focused Tmall in 2014, by parent company Alibaba, to help international companies reach Chinese audiences.
Together, Tmall and Tmall Global serve more than 500 million buyers and feature more than 70,000 brands. Nike, Samsung, Disney, Estee Lauder and Levi’s are just a few of the brands with their own flagship stores on Tmall Global.
Items that tend to sell well on Tmall Global are cosmetics, health care, baby items and clothing.
Kaola is another popular CBEC platform, launched by NetEase in 2015. Although it has a smaller range of products than Tmall Global, Kaola has built a reputation as the go-to platform for higher-end, boutique and niche products. It has more than 30 million monthly active users.
Kaola is also known for its user experience, offering users a paid VIP option that gives users a more personalised shopping experience.
Alibaba purchased Kaola in 2019.
JD Worldwide is a subsidiary of the Chinese e-commerce giant JD.com, and has been active since 2015. It is one of the largest cross-border e-commerce platforms in China, with more than 240 million registered users, across both JD and JD Worldwide.
JD Worldwide tends to favour products like home appliances and electronics. The platform is more lenient with its brand requirements and offers robust logistics solutions, making it one of the more flexible platforms for overseas brands.
How much does CBEC in China cost?
The Chinese government has enacted a host of beneficial policies that encourage cross-border ecommerce, and this makes CBEC relatively cost-effective compared to other countries. But that doesn’t mean you can ignore the costs involved. Embarking on the CBEC journey requires careful planning and budgeting if you want to succeed. Here are some of the costs that most CBEC businesses will encounter:
- Platform fees, which can include a security deposit, an annual fee and sales commissions
- Payment processing fees
- Product storage costs (whether in China or country of manufacture)
- Shipping costs, including packaging materials
- Warehouse and transportation management systems
- Advertising and marketing campaigns
- Design fees for designing and optimising your digital shopfronts
- Customs trade costs and other taxes
A good CBEC agency will ensure that you’re aware of all costs upfront and can help you develop a sales strategy to optimise your ROI.
Do you need a local partner to do cross-border ecommerce in China?
There’s lots to consider when embarking on your CBEC journey, including the language barrier, the foreign regulatory landscape and the differing consumer preferences. And while it’s possible to go it alone, unless you are a large multinational, you’ll probably want to work with an agency like RooLife group to help get you started.
A good agency will:
- Advise you through the application process to start selling on CBEC platforms
- Help devise your go-to-market strategy
- Design your digital shopfronts
- Conduct influencer outreach and other digital marketing initiatives
- Offer Chinese-language customer service for your customers
With the right guidance, you can learn how to navigate this new landscape and find success in China.
Cross-border ecommerce in China is a fascinating frontier that is still in its infancy. Fortunately, more and more tools are being developed every year to help businesses like yours find success in the burgeoning Chinese market.
We hope this guide serves as an easy reference tool to help you get started.