2018 has been a great year for the cross-border e-commerce industry in China.
The Chinese government’s decision to lift purchase limits on cross-border e-commerce (CBEC) indicates a strong outlook. More opportunities will emerge for international brands and retailers looking to access the China market.
That being said, the competition is heating up and brands and retailers are finding it increasingly difficult to differentiate themselves in a crowded market. The Shenzhen-based cross-border e-commerce company Azoya Consulting published their predictions for the industry and here are the three highlights:
1. Daigou will split into two groups, and some will exit the market completely#
What’s going on:#
China’s new e-commerce law is forcing individual sellers on WeChat and Taobao to obtain business licenses and file tax returns. This includes daigou agents using personal accounts to sell online.
Smaller daigou may forego selling and become micro-influencers, helping larger daigou organizations market products on WeChat while earning a commission in the process. Many daigou may exit the market completely.
Implications:#
All in all, expect the quality of daigou agents to improve, the supply of goods to shrink, and more consumers to purchase from official cross-border e-commerce channels.
2. More retailers may leave large marketplaces like Tmall Global and consider alternatives#
What’s going on:#
Large e-commerce platforms such as Tmall Global, JD Worldwide, and NetEase Kaola are procuring their own inventories directly from brands, and stocking them in bonded warehouses closer to China. This means that Tmall Global can provide lower prices, faster logistics, and stronger customer experience.
Third-party retailers selling the same brands on these platforms will find it difficult to compete on price and logistics and may launch their own independent websites instead. Macy’s is one retailer that has left the China market after closing down its Tmall store and official China website.
Implications:#
Expect more retailers to leave Tmall Global, JD Worldwide, etc. and launch their own platforms.
3. The government will continue to lower tariffs and loosen restrictions on cross-border e-commerce companies selling to China#
What’s going on:#
China is expanding the scope for cross-border e-commerce because cross-border e-commerce can be better tracked and taxed when compared to gray-market daigou purchases. It also makes it easier to protect consumers from fake/shoddy goods.
The limits on CBEC purchases have been increased to 725 (RMB 5,000)/transaction and 3,770 (RMB 26,000)/year, up from 290 (RMB 2,000) and 2,900 (RMB 20,000), respectively. In November, taxes on inbound postal shipments were reduced from 30 percent for personal items (such as apparel, footwear, and bags) and 60 percent for cosmetics, tobacco, and alcohol to 25 percent and 50 percent, respectively.
Implications:#
Expect the government to further relax restrictions on the industry and expand its scope.
To read the full version, please visit Azoya's corporate blog.