Shanghai leads Chinese cities in many areas, from per capita income to the number of skyscrapers. Now it has a new feather in its hat: its residents spend more than any other Chinese on cross-border online shopping.
During last year’s Black Friday promotion in the United States in November, Chinese consumers’ overseas payments via Alipay tripled from a year earlier. Alipay is China’s leading third-party payment platform affiliated with Alibaba Group Holding Ltd.
Online shoppers in Shanghai accounted for 16.1 percent of China’s overall buying spree, followed by people in Beijing and the three provinces of Guangdong, Jiangsu and Zhejiang, respectively.
China has designated several cities, including Shanghai, to test out pilot schemes for cross-border e-commerce. As of the end of 2014, the total value of these schemes’ imports and exports had exceeded three billion yuan ($483 million), according to data from the General Administration of Customs.
The consumption habits of younger Chinese are vastly different from those of their parents. They are not satisfied with cheap and low-grade goods but care more about quality and fashion.
After learning how cross-border shopping online can save them money－despite the relevant taxes and shipping charges－and provide guarantees of authenticity, they are giving domestic goods more of a cold shoulder.
There are a number of reasons behind the rise of cross-border e-commerce in China and the launch of various platforms to service this trend is natural, said Ben Cavender, an analyst at China Market Research Group.
More Chinese now shop overseas or pay for third parties to purchase products and mail them back to China, because many products either cannot be found in China or they are too expensive, he said.
About half of all cross-border shopping online by Chinese goes through Amazon.com and these products are sent to customers via shipping agents or online agents, said Niu Yinghua, vice-president of Amazon China.
As the agents bump up the price, Amazon decided to introduce a direct shipping service for its Chinese customers that can be as low as $1.99 per pound of freight, Niu added.
The central government has adopted a quite open-minded stance in response to this exploding e-trend. Premier Li Keqiang, for example, included plans to expand the number of trial cities operating this system into his Government Work Report this year.
Many Chinese consumers find themselves shut out of the shopping spree because of the language barrier, which has inspired e-commerce companies to step into the breach.
According to data from the Ministry of Commerce, there are more than 200,000 enterprises in China offering cross-border e-commerce service through various platforms.
The big e-commerce players in China are fast grabbing territory in this emerging market, said Cavender.
In February 2014, Chinese e-commerce giant Alibaba Group announced the official launch of Tmall Global, a site designed to give Chinese online shoppers a platform to buy foreign-branded products directly.
“Tmall Global plans to develop the emerging cross-border e-commerce mode into a mainstream purchasing habit of Chinese people in the next five years,” said Wu Qian, general manager of Alibaba’s cross-border B2C (business-to-customer) department.
Tmall Global boasts many advantages. It has 300 million customers and many years’ experience operating Taobao.com, China’s largest online retail portal, which is also affiliated with Alibaba.
“The brands or products we decide to launch on Tmall Global are based on our monitoring of our customers’ purchasing habits and data through Taobao over the years,” said Wu.
Amazon.cn, the Chinese branch of the American e-commerce group, launched Amazon Global Store in November 2014 so Chinese customers could buy the same products in China as others using the US version of its website.
It was launched less than three months after the company signed an MOU with the China (Shanghai) Pilot Free Trade Zone and Shanghai Information Investment Ltd.
The deal is expected to help expand the online retail giant’s China business under the special zone’s favorable policies, such as lower shipping costs and shorter freighting times.
Amazon China is quietly confident about its wide selection of products and cross-border shipping network.
Within just five months, Amazon Global Store now offers 1.7 million products across borders, 20 times the number when it launched on Nov 11 last year.
“We see increasing demand from domestic consumers to buy international products tailored to their purchasing habits, and that is why we’ve quickly expanded our selection of products,” said Niu.
In mid-April, China’s second-largest e-commerce player JD.com launched its cross-border e-commerce platform, JD Worldwide.
Despite its latecomer status, JD.com is actively using China’s free trade zones and bonded areas to help connect international brands with Chinese consumers while reducing costs and increasing speed, it said.
“The resources JD.com brings in terms of logistics support and marketing expertise will help foreign brands succeed on our site,” said Leo Li, its vice-president.
Products that go through the FTZs or bonded areas will be delivered by JD.com’s last-mile delivery team, while dedicated staff will tailor marketing campaigns to help foreign brands get good visibility.
Cross-border e-commerce accounted for 14.8 percent of China’s total foreign trade by volume in 2014, according to iResearch, which forecasts the annual growth rate of the market in China will stand at 26 percent per annum until 2017.