Analysys: China's Cross-border Import Retail E-commerce Market Model in 2018

In 2018, the introduction of a series of laws and policies further standardized and improved China's cross-border import e-commerce market, which is currently in a rapid development stage. C2C model represented by "purchasing on behalf of others" will face difficult development due to the rising cost. B2C manufacturers have become the mainstream of the market, and integration and competition will become more and more fierce. With the increase of the limit of individual single transaction and annual transaction, the consumer's consumption ability will be further released and the market will continue to develop at a faster speed.

The view of Analysys:

Analysys believes that China's cross-border import retail e-commerce market is currently in a period of rapid development.

Exploration period: (before 2014)

With the vigorous development of China's economy and the continuous growth of China's per capita disposable income, the public has gradually acquired the ability to undertake medium and high-end consumption, and more and more people have overseas travel, study and life experiences. As there are more opportunities to contact and use foreign commodities, their uniqueness, ease of use and high cost performance not only open up a new understanding of consumption for these people, but also enable them to gradually accept foreign brand culture and commodity usage habits. At the same time, domestic commodities are constantly exposed to problems in terms of quality, safety, function and price. When these people compare the consumption concepts and concepts received from abroad with the domestic consumption environment, they unconsciously become information disseminators of foreign commodities and educators of the domestic market. In addition, with the progress and use of Internet and mobile Internet technologies, social networks and e-commerce have developed rapidly, which has promoted the acceptance rate and scope of domestic consumers to consume foreign goods and laid a technical foundation for the realization of foreign goods consumption. People with foreign experience have noticed the potential consumption demand of domestic users and naturally become the source organization for domestic users to obtain foreign goods.

At the beginning of the exploration phase, cross the border; The process of consumption starts with domestic users knowing the information of the goods of interest through various channels in an active or passive way, and inviting relatives and friends abroad to purchase, or even purchasing directly from foreign e-commerce websites, and then mailing back to China or bringing back through returning personnel. This way of relying on direct mail and human flesh to carry goods has the problems of high cost and poor timeliness, and may also involve the problems of commodity customs clearance procedures, which is very inconvenient. Although some overseas people actively try "purchasing on behalf of others" for the purpose of making profits or easing the pressure of travel costs, they are still limited in convenience and scale. These pains have become opportunities for forerunners. Some sensitive businessmen have begun to set up international logistics services for the B and C ends, striving to reach a balance acceptable to users in terms of cost and timeliness, so that foreign goods can be easily imported into China through transshipment, direct mail and other means, and gradually gathered buyers from all countries and regions.

With the further penetration of domestic e-commerce in various age groups and regions, domestic users are consuming more and more foreign goods through e-commerce platforms. With the expansion of market demand and the expansion of overseas purchasing agents, the transaction scale and profit scale generated by it also increase and become considerable gradually. Judging this trend, Alibaba launched Taobao Global Shopping in 2007, enabling consumers to have a relatively centralized and standardized platform to purchase foreign goods.

However, under the condition that the relevant supervision and inspection measures are not perfect, due to the temptation of high profits, many substandard commodities with fake, fake, expired and shoddy conditions have appeared on Taobao Global Purchase, which has reduced consumers' confidence in purchasing overseas commodities.

Market Launch Period: (2014 -2017)

After several years of exploration, various Internet companies and e-commerce platforms have made relatively optimistic judgments on cross-border import business. They all predict that the scale of the cross-border import market will continue to develop rapidly. At the same time, they are fully aware that the major C2C model at that time only explored part of the users' needs for cross-border import business. Consumers' high demands on commodity brands, quality, authenticity and other aspects are equally important to e-commerce platforms. This is not only an opportunity for the overall market to step up to a higher level, but also an opportunity for e-commerce platforms to establish a brand image of consumption upgrading. Therefore, in 2014, Tmall global was born in the breeding and care of Tmall. In 2015, Netease took Netease koala sea purchase as a breakthrough to vigorously develop its e-commerce business. jingdong, one of the representative platforms for B2C, also set up jingdong global purchase that year. By 2016, all major e-commerce platforms will have basically opened cross-border businesses and all want to take a piece of the fast-growing market. However, in 2017, some manufacturers that do not have advantageous resources at the supply chain end and the customer end began to gradually give up cross-border business, such as Gome and Dangdang have cancelled cross-border channels.

At this stage, traditional e-commerce, traditional traders, traditional retailers and even initial entrepreneurs all set foot in cross-border areas in order to gain a place in the booming market and share the dividends brought by the blue ocean economy. Due to the competition for users and market share, manufacturers frequently use the strategy of price war to sell explosive products with large demand, and publicize brand value through online and offline channels. This kind of management strategy not only attracts users and increases sales performance, but also imposes a great burden on cost control. As a result, some manufacturers are in a difficult operating situation, and manufacturers with limited resources and insufficient core competitiveness begin to fall down one after another.

At the same time, at this stage, the national level began to successively issue policies and regulations related to cross-border e-commerce imports to regulate and promote the healthy growth of the overall market. Among them, the announcement of the General Administration of Customs on the 56th and 57th of 2014 clearly defined the legal status of cross-border e-commerce. In 2016, the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation jointly issued the Notice on Tax Policies for Retail Imports in cross-border electronic commerce, further standardizing the relevant procedures for cross-border imports. With the three postponements of the implementation of customs clearance policies and the registration and filing of first-time imports after the "New Deal of April 8", cross-border e-commerce businesses sensitive to policies have been "untied", thus entering a period of rapid development.

High-speed development period: (2018-)

With the adoption and implementation of the Electronic Commerce Law, the development of cross-border electronic commerce will be promoted. In terms of supervision, the relevant departments will establish and improve the management systems of customs, taxation, entry and exit inspection and quarantine, payment and settlement, etc. which are adapted to the characteristics of cross-border electronic commerce, promote the construction of a comprehensive service and supervision system for customs declaration, tax payment, inspection and quarantine in cross-border electronic commerce, optimize the supervision process, promote the realization of information sharing, mutual recognition of supervision, mutual assistance in law enforcement, and improve the service and supervision efficiency in cross-border electronic commerce. After the e-commerce supervision and tax payment mechanism is further improved, C2C modes such as "purchasing on behalf of others" will face difficulties due to the increase in costs, and the main competition for cross-border imported e-commerce will be launched in major B2C platforms. First of all, more and more foreign brands are introduced into China through cooperation and agency, and a few foreign brands are forced to withdraw from the Chinese market because they cannot provide more localized products and services for Chinese consumers. Secondly, the market share of cross-border e-commerce will further gather with leading vendors. Only small vendors that deeply plough into subdivided fields and provide specialized and customized services can hold onto the long tail market. In the end, the competition of head manufacturers will focus on the fine and precise operation of users, and manufacturers with good user accumulation and viscosity will have opportunities for rapid development.

In addition, the Notice on Improving the Supervision of Retail Imports in cross-border electronic commerce, which will be implemented on January 1, 2019, specifies the subjects involved in cross-border e-commerce retail imports (cross-border e-commerce enterprises, cross-border e-commerce platforms, domestic service providers and consumers), clearly delineates the responsibilities and obligations of each subject, facilitates supervision and transactions, and protects consumers' rights and interests more comprehensively. At the same time, the limit for single and individual annual transactions of retail imported goods in cross-border electronic commerce has increased, further releasing the purchasing power of users for cross-border goods. After this transition period, the new policy for cross-border retail import e-commerce will be a relatively long-term arrangement, and manufacturers will welcome opportunities for rapid development.

Application Maturity Period (2022-):

As the application matures, the market structure of cross-border import retail e-commerce is basically determined, the growth rate of market scale slows down, and industry competition will turn to new retail formats and supply modes to make active exploration. With the national and industrial standards for domestic commodities becoming more and more strict and the quality management system becoming more and more perfect, domestic manufacturers have made great progress in the quality, quality and flexible supply of commodities, which will have an impact on cross-border imports. Under the background of the free integration of global trade, the border between cross-border e-commerce and domestic e-commerce will gradually disappear, the importance of judging consumption based on the origin and source of goods will become lower and lower, and cross-border e-commerce will no longer be a separate format, but will evolve into a necessary channel for global commodity allocation. With the simplification of the supervision process and the improvement of the way, cross-border e-commerce providers can still explore the offline layout and provide better shopping experience by using the way of "offline experience order placing+express delivery to the door" even though the "offline self-promotion" mode is not allowed in principle at present.

For consumers:

Consumers' demand for cross-border shopping went through several processes: they chose to buy cross-border goods because the domestic market did not have them-> they chose to buy cross-border goods after weighing because the price-performance ratio of domestic goods was low-> they bought cross-border goods with better quality and more prominent brand image because the quality of domestic goods was not stable enough. With the increasing income of residents and the relaxation of restrictions on the purchase of personal cross-border commodities in policies, a new generation of users have stronger consumption ability to choose cross-border commodities to meet their growing consumption demand. As more and more brands are introduced into China, consumers in the new era have the ability and opportunity to pursue more personalized, unique and customized choices. Large e-commerce companies that can accommodate more long-tail cross-border goods and small vertical manufacturers that intensively cultivate a certain consumer group can find enough living space, and the diversified needs of consumers can be more fully met.

For suppliers:

Suppliers need to maintain sensitivity to policies and consumer demand and adjust their business strategies and products to meet the market. For brand merchants with existing market and awareness in China, the inherent channels and modes inherited from the traditional trade era may still be the main source of profits. How to balance the interest relationship and brand connection with traditional channels and online cross-border channels under the control line needs constant exploration by suppliers. For brands that did not have distribution channels in China before, choosing a cross-border e-commerce platform that is similar to their own brand appeal and business philosophy, or cooperating with appropriate agent operators, is an important way for suppliers to quickly open up the Chinese market. In addition, by taking advantage of cross-border e-commerce companies' direct and rapid access to consumers and their ability to exchange information, brand companies can fully understand the Chinese market, efficiently adjust product and business strategies, and flexibly transform and upgrade cross-border supply chains.

For investors:

Compared with the previous three years, the number of companies obtaining financing in the cross-border e-commerce sector continued to decrease in 2018, while the amount of financing increased slightly compared with 2017. Manufacturers with certain strength and foundation in the field, such as another, Onion Omar and Haipai, have all obtained new investments this year. As the market enters the stage of rapid development, the integration capability of large manufacturers is continuously strengthened. Small and medium-sized manufacturers are facing the fate of being integrated or transformed. Capital is more cautious in entering and more concentrated on financing with more mature business and later rounds. Investors' decision-making should not only be based on the position and development speed of manufacturers in this field, but also take into account factors such as market development trend, changes in user demand and the adaptability of manufacturers. After experiencing a period of rapid development, cross-border e-commerce and other forms of e-commerce and retailers will blur their boundaries and gradually merge into one. Cross-border e-commerce will no longer be a separate format, but will evolve into a necessary channel for global commodity allocation.

Alibaba, a typical enterprise in the market:

In the era when the concept of cross-border was just emerging, it was mainly personal commercial behavior at the beginning. These purchasing agents were mainly relatives and friends around the purchasing crowd, and their business scope was limited to a certain extent. However, when purchasing on behalf of the commercial behavior and the combination of e-commerce, e-commerce platform-based transactions broke through the time and space constraints, and sellers can also obtain a large number of users at a lower cost, so e-commerce platform has become an excellent sales carrier for purchasing on behalf of sellers. At the same time, due to the lack of other influential C2C e-commerce trading platforms, Alibaba's Taobao has become a gathering place for online purchasing transactions. However, the sellers and goods purchased on behalf of others are only scattered on the trading platform. There is no specific rule to restrict them, nor is there a relatively fixed entrance and channel to display them. Under the circumstances that the effective needs of buyers and users cannot be efficiently transformed, and the sellers do not have normative service processes, the emergence of a specialized purchasing platform is very necessary. So in 2007, in order to solve the problems encountered in the process of purchasing goods on Taobao platform, Alibaba launched Taobao Global Purchase.

Taobao's global purchase is a relatively convenient market for both buyers and sellers, resulting in a relatively obvious cross-border network effect. While the scale of users is increasing, the number and sales volume of the sellers who purchase on behalf of them are also increasing. In addition, some fast-growing purchasing agents have also moved towards a team-based and corporatized operation. Taobao Global Marketplace has gradually started to see purchasing agents operating in the name of individuals. However, the defects of supervision and restriction on purchasing on behalf of individuals in the rules and regulations are obviously magnified in the rapidly developing market, with fake goods, expired goods, defective goods and other commodities flooding in, and the trust of users in purchasing on behalf of individuals is gradually decreasing. In this process, purchasing agencies have also sought ways of transformation and started to focus on the construction of upstream supply chains. At the same time, traditional trading companies have also begun to test water e-commerce channels and participate in the development of cross-border e-commerce markets. Trading in a specialized and standardized market that is different from individual purchasing has become the common demand of users and merchants. Alibaba has also accurately grasped the changes in market demand and introduced Tmall International in the form of B2C in 2014, drawing on Tmall's operating experience.

Entering 2018, Alibaba announced in March that it would launch the "big import" strategy and set up six global purchasing centers. Tmall International plans to attract trillions of consumption abroad to return in the next three years, serve 200 million new middle classes and incubate 100 global small and medium-sized brands for listing. In April, Tmall International opened its first offline store in Hangzhou. In July, Taobao Global launched a global buyer recruitment program in Hong Kong, hoping to expand the global buyer base to 50,000 within one year. At the fair held in November, Alibaba announced that it would import 200 billion US dollars in the next five years. In the Double Eleven, Tmall International accumulated bonded orders in 24 hours, accounting for nearly 80% of China's total cross-border import orders in a single day. On November 26, Tmall upgraded to "Big Tmall", forming three major sectors: Tmall Business Group, Tmall Supermarket Business Group and Tmall Import and Export Business Group. With the continuous improvement of relevant policies, the layout of Alibaba's cross-border import retail e-commerce is also getting faster and faster.

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