As foreign goods remain popular with Chinese consumers compared to homegrown brands, a quarter of China’s entire population is predicted to be ordering items through cross-border e-commerce by 2020.
This estimate was released by digital research firm eMarketer this week, projecting that 291.8 million online shoppers will spend US$160 billion on cross-border e-commerce by 2020. This marks an increase from 128 million cross-border online shoppers in 2015. The report says this number will surge to a projected 181.2 million spending US$85.8 billion by the end of this year. The share of total online shoppers who buy cross-border goods is set to increase dramatically as well, moving from a projected 40 percent this year to 50.7 percent by 2020.
Higher trust in the quality of foreign goods than Chinese brands—especially when it comes to luxury items and food products such as baby milk powder—prompted e-commerce giants Alibaba and JD.com to both launch global shopping channels in 2014 and 2015, respectively. Both are courting foreign luxury brands. Tmall Global includes Macy’s among its cross-border retailers, and its new Mei.com luxury channel will include a cross-border component. Meanwhile, competitor JD.com has held fashion shows at both Milan and New York Fashion Week in hopes of attracting brands to its global shopping platform. Its current brand lineup for its “U.S. Shopping Mall” includes Calvin Klein, GUESS, Under Armour, and more.
China’s cross-border e-commerce market might not be completely smooth sailing for retailers, however. On April 8, the Chinese government introduced a new tax policy that effectively upped the price of goods coming in from abroad, which had generally been cheaper under a “parcel tax” system. The new policy imposed import value-added tax (VAT) and consumption tax on items ordered from abroad. This is having an especially large effect on e-tailers selling luxury goods, as only items that are 2,000 RMB (USD $308) or less will be subject to a tax break.
Nonetheless, the projections are optimistic about Chinese consumers’ willingness to pay a premium for foreign brands. According to eMarketer forecasting analyst Shelleen Shum, the new tax policy “negatively affects some categories of goods,” but “the demand for foreign goods via the cross-border e-commerce channel is still expected to remain strong due to better prices compared to offline retailers, perceived quality and better variety.”
In addition, the report predicts that B2C (business-to-consumer) will become increasingly popular with consumers “as consumers shift to platforms that are more professional and organized,” says Shum. “Since the merchants selling on these B2C platforms have to be authorized, they are considered more trustworthy.”