Cross-border e-commerce heats up in China as innovations take hold

By Sara Hsu

Chinese cross-border e-commerce trade increased by 80.6% in 2017 to 90.24 billion RMB ($14.22 billion). This reflects rapid growth in China’s e-commerce industry overall, which is a leader in retail innovation. Chinese firms are leading global development in e-commerce through pioneering new sales and delivery channels, using social media to connect with customers, and holding shopping festivals to reach buyers. 

Customs workers check imported goods at the Hangzhou Cross-Border E-Commerce Industrial Park in Hangzhou, capital of east China's Zhejiang Province, Nov. 10, 2015.[Photo: Xinhua]

Cross-border e-commerce growth

Exports rose by 41.3% to 33.65 billion RMB ($5.3 billion), as imports increased by 116.4% to 56.59 billion RMB ($8.92 billion). Major purchasers of Chinese e-commerce goods are the U.S. and the E.U. Cross-border marketplaces supported by companies like Alibaba and JD have boosted these sales. Overseas sales are often driven by online marketplaces like Tmall Global and JD Worldwide, which allow producers to sell directly to foreign buyers without having to go through a longer trade process.

Payment technology has played an essential role in boosting cross-border e-commerce. Payment platforms like Alipay and Tenpay were given permission to accept cross-border online payments in 2013. These platforms carry out currency exchange for the buyer or seller. While there are still some bumps in the road in terms of controlling for risks, cross-border payment transactions have seen enormous growth, expanding from $6.7 billion in 2015 to $13.3 billion in 2016.

China’s government has also taken a supportive stance toward cross-border e-commerce.  Speaking at the first Global Cross-Border E-Commerce Conference in Beijing in early February, Vice Premier Wang Yang called on other countries to lower barriers to trade in cross-border e-commerce. China itself has already set up cross-border e-commerce pilot zones from 2015 to 2017 to extend trade in this area. The zones have strong infrastructure and trade potential, as well as bonded warehouses for overseas firms to store goods without immediate payment of duty. China has also set up service platforms to assist with customs clearance, payments, logistics, tax refunds, and supply chain services. Further simplifying matters, the government has set up a positive list of items that can be imported through cross-border e-commerce. 

Wider growth and innovation of e-commerce

Cross-border trade in e-commerce reflects the wider growth and innovation of e-commerce, which has expanded at twice the pace of total retail.  China accounts for 40% of retail e-commerce worldwide. Alibaba’s Tmall and JD.com have the largest market share in China’s e-commerce industry. Currently, e-commerce firms are experimenting with new ways to market and distribute goods, creating an environment of innovation surpassing that in the West.

First, Chinese firms have embarked upon new avenues of marketing goods using e-commerce, including the New Retail model initiated by Alibaba, which uses data analytics to create a seamless customer experience between online and offline stores and allows customers to buy goods via multiple channels. Alibaba and JD.com have invested in offline stores to integrate online and offline purchases. Most recently, Alibaba announced the purchases of a 15% stake in Beijing Easyhome Furnishing Chain Store Group Co. and a 38% share in Shiji Retail Information Technology Co. in order to expand its new retail presence.

Second, e-commerce platforms have also mingled sales of goods with social media to increase interaction with shoppers. Social media allows customers to comment, share product information, and purchase the product through the social media app. JD.com has become the exclusive shopping channel for WeChat purchases. Loyalty programs may be incorporated into social media in order to target consumers. International brands like Coach and the Gap have created a presence on WeChat using this method.

Third, shopping festivals are another way in which Chinese e-tailers reach customers. The events occur on holidays, such as Spring Festival, Women’s Day, and Singles’ Day. Alibaba launched a shopping festival for Singles’ Day in 2009, and the holiday has drawn an increasing number of online shoppers every year since then. Last year, Chinese shoppers spent a whopping $25 billion on the November holiday. This year, a number of shopping festivals are being held online for the Spring Festival. For example, the Xi'an International Trade and Logistics Park launched an online shopping festival on Feb 7 with over 140 e-commerce companies selling a range of products, including special gifts.

All of these factors have made China an important innovator in e-commerce, boosting growth in the industry. New ways of marketing and distributing to consumers will help to ensure the ongoing ascent of Chinese e-commerce in the years to come.

(Sara Hsu, associate professor, the State University of New York at New Paltz)