The Cross-border E-commerce: A New Market Entry model into CHINA for several HEALTHCARE product categories.
by Spiren 0 comments
First of all, the magnitude of the phenomenon… From 18 million in 2013, Chinese online cross-border shoppers are expected to become 36 million, and to spend through this channel RMB1.0 trillion a year by 2018. Currently, cross-border revenues account for 12% of the total Chinese e-commerce, with a rapidly expanding share. China has become the second cross border online destination. The Cross-border E-commerce China opportunity consists of selling to Chinese, not in China, from abroad. Abroad can be defined as HK, duty-free zones in China as well as commonly USA, France, Germany, Japan, Korea. Consumers buy products via overseas online platforms, and this is generally referred as “haitao”. The CEO of one of the leading Cross-border E-commerce distribution companies, adds “the most popular categories are Health Food, Beauty Device, Cosmetics and Baby milk, accounting for 90% of the Cross-border E-commerce sales volume! Haitao shoppers’ purchase behaviors are essentially driven by safety or value protection”. Brands are international, origin is guaranteed, and products are directly delivered to Consumers’ home.
WHY DOES IT MATTER?
Conventionally, Health Food, Beauty Devices, Cosmetics must obtain regulatory approval, which is a costly and long process. The (BtoC) Cross-border E-commerce provides a number of Health product categories with a new market entry model. Moreover, this can become a realmarket test before starting up a conventional regulatory process by selecting the right brands, according to the Cross-border market performance.
HOW DOES IT WORK?
The importer is the individual consumer, and purchases through “Haitao” websites: KUAJINGTONG, AMAZON, TMALL, SUNING… Several platforms have partnered with Alipay or Tenpay to settle payments. Consumers can pay in RMB and these payment service providers will then help settle payment in foreign currencies. In regards of the customs duties, the seller takes care of the declaration to the Tariff Bureau, on behalf of the consumers. Several pilot zones have been established: Shanghai, Chongqing, Ningbo, Zhengzhou, Guangzhou, Shenzhen and Qianhai. Overall, payment methods are now more convenient; delivery can be shipped to consumers in less than 7 days. Last but not least, since a few distribution intermediaries are bypassed, tariff tax rates that tend to be lower than general trade and optimized shipping costs by combining orders, the end-customer price is often reported to be competitive against traditional trade.
Recently, the Chinese government has launched several new regulations to try to streamline this market, and at the same time to promote cross-border e-commerce. A reform that shall be released next April is expected to impose one unique tariff tax rate at around 12%, regardless of the product category. If so, this would be a clear sign of support from the authorities. The “Haitao” market will continue to grow exponentially and provide a new opportunity to enter into China for new brands, particularly Health Food, Beauty Devices and Cosmetics. Critical Success Factors become an exceptional CRM associated with the access to a base of millions of e-shoppers.
So… what is your Haitao Strategy?
It would be great hear your views.