Cross-border e-commerce for European SMEs
As a foreign company, if you want to open your web shop on one of the domestic e-commerce platforms in China, such as Tmall, JD.com or any other domestic platform, you need to have your own subsidiary in Mainland China. Alternatively you can also work with a Chinese trade agent, distributor or any other Chinese partner with a legal entity in China. However, since Chinese trade agents are usually cautious to have unsold goods in their warehouse in China (the risk of not selling is on the legal entity in China), they charge relatively high margins over the imported products. Moreover, foreign companies have little control over the final B2C part of selling their products.
If you prefer to sell your products directly to the Chinese consumer, but don’t have your own legal entity or partner in China, you could consider to sell your products through cross-border e-commerce (CBEC). By using cross-border e-commerce, an overseas legal entity can export its products to a bonded warehouse (B2B2C) or via the direct mail (B2C) model directly to the Chinese consumer.
Cross-border e-commerce in China is only allowed for registered legal entities outside of Mainland China, who own the brand or are an authorized distributor or franchiser. However, it is obligatory to provide customer service in the Chinese language and also product details should be written in Mandarin Chinese. Additionally, products must be dispatched within 72 hours after order placement and a product return center must be available in Mainland China.
To facilitate CBEC, the Chinese government has implemented a separate tax and duty system which applies to CBEC trade. Also, products must comply with a different set of regulations than normal trade regulations.
Same as for the regular e-commerce business, also for cross-border e-commerce Alibaba and Jingdong are the two biggest platforms. Their CBEC platforms are called Tmall global and JD Worldwide. Two other big CBEC platforms are Suning Global and Amazon China Global Store, and there are numerous other (smaller) cross-border e-commerce platforms to choose from, which focus on certain specific product categories, such as for example baby products, food & beverages, electronics, etc.
Please note, selling via cross-border e-commerce in China should only be considered a first entry strategy into China, an ideal and cost-effective way to test the market and generate market share, brand equity and a relevant customer base in China. In the meantime plans should be made to enter the Chinese market through a general trade strategy.
Horsten International has over 25 years of experience doing business in and with China, please don’t hesitate to contact us for more info on this topic! For more background information, please also check the lecture given by Bart Horsten on this topic on the following link.