Since 2015 China designated 105 Cross-Border E-commerce (CBEC) pilot zones in which local governments provide policy benefits in relation to customs clearance, logistics, payment, legislation, tax, etc. To goal is to stimulate international e-commerce activities for foreign companies. It has proven to be a successful model that is driving the growth of foreign trade in the country.
In 2021, despite the negative implications of the recent pandemic on international business, China’s total trade in goods crossed the 6 trillion Euro mark for the first time. Another 27 Cross-Border E-Commerce (CBEC) pilot zones have been appointed early this year to stabilize foreign trade and investment. In addition to the focus on promoting trade, there is also a growing emphasis on information security. As of March 1st, there will also be 29 more product categories added to the so-called positive list for Cross-Border E-Commerce Retail imports, including ski and golf equipment for example.
These developments will provide increased opportunities for foreign companies. It stimulates trade through the different e-commerce models that online platforms can offer. Whether the business focus is on the traditional business-to-business (B2B) or business-to-consumer (B2C), in China the marketplace is usually a more integrated and complex business-to-business-to-consumer (B2B2C) structure, in which consumer-to-consumer (C2C), direct-to-consumer (D2C), and also manufacturer-to-consumer (M2C) are all common variation models that have to be taken into account.
The Cross-Border E-Commerce (CBEC) market in China is mainly in the hands of these massive online and social marketplaces, on which foreign brands can offer their products, sometimes without having to physically establish an entity in the country itself. Certain successful CBEC platforms can be found in:
- Tmall Global, the international counterpart of the local Tmall from tech giant Alibaba is the undisputed no.1 with a 25% market share. Since their takeover of Koala, which has a 17% market, it is difficult for other parties to compete.
- JD Worldwide, from the other tech giant Tencent also has a significant market share of 15%. In recent years JD is exploring more investments in Europe setting up local collaborations with e-commerce platforms.
- Little Red Book (Xiaohongshu), occupies a smaller share at 5% but is considered to have a lot of growth potential through their social media model that is particularly popular with the younger generations. There has been a trend in recent years spurring more of these social media models.
Since there are so many different platforms in the market, it is sometimes difficult to make the right strategic choice. Different platforms can provide a different edge in specific industries. There will be a lot of companies offering help in this regard, but ultimately China will need to have a strategic focus in the expansion plans, which needs investments not only in financial terms but also time. Time to understand the marketplace to effectively integrate the business. CBEC is an interesting option to start with, especially in these times controlled by travel restrictions. In order to be successful, adopting an omni-channel approach in the fast-changing Chinese marketplace will be needed, in which a certain physical presence can be indispensable.
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