Page 252 - 2018 White Paper on the Business Environment in China
P. 252
8 White Paper on the Business Environment in China
Haitao has become popular with the younger middle- or prohibiting foreign merchandise bought online.“It was
class shopper who takes advantage of the Internet kind of a knee-jerk reaction from the government: ‘Sorry
to search and buy from e-commerce sites based in if you are not on the approved product list, you are not
developed countries such as the U.S. and Germany. able to sell,’” said Ron Wardle, the Chief Executive Officer
The phenomenon actually started about ten years ago in China of ExportNow, which helps foreign brands
as a natural development of the 20 years continuous navigate cross-border e-commerce. “They got so much
economic booming in China. The middle class’s demand international media attention from this and said, ‘Wow
for a higher standard life needs to be fulfilled. Back then, this is bigger than what we thought.’” The result was that
most of the products were shipped through intermediary the government withdrew the list a few weeks after it was
shipping companies to transfer back to China since most announced and has been working with online retailers to
foreign e-commerce sites didn’t offer the direct shipping come up with a more tractable solution. The government
service to the China. “If you do not harmonize the rules promises the next iteration of the “positive list” in early
for commercial imports and cross-border e-commerce, 2018 (Chang).
there is an advantage you give to companies overseas,”
said Chan Wai-Chan, a retail partner at consultant firm
Oliver Wyman in Hong Kong. Companies that have
invested in actually having a physical presence in China
feel as though they’re being blindsided by businesses
that haven’t gone through the same expense of setting
up shop, he said. Wal-Mart, Costco, and Aldi are among
companies sharing in the $60 billion of sales that make up
the alternative channel, and their merchandise — some
of which aren’t approved for sale in shops in China — can
be delivered from bonded warehouses in designated
zones to consumers in as quickly as a day (Chang).
Over 58 million Chinese customers spent 7.5 trillion
yuan in 2017, according to iMedia Research. These
shoppers regularly spend 300 to a thousand yuan per
purchase. Alibaba still dominates the Chinese market
with a 70 percent market share, but the market remains
fragmented with no player getting more than 25 percent
of the total market. Japan is the top destination followed
by the South Korea, U.S. and Germany. Frequency of
purchase is surprisingly high with 65 percent of users
purchasing at least once a month and 11.6 percent do so
once a week. Orders of 1,000 to 5,000 yuan are extremely
common via cross-border WeChat stores (Graziani).
Products sold through these routes are also not
subject to the many Chinese taxes that are levied on that
same item sold through traditional channels, effectively
allowing brands to arbitrage against themselves,
according to Bloomberg. The government proposed
three changes in April 2016: a marginal tax increase,
limits on the volume of purchases to ensure transactions
are for personal use only, and a list of “positive” foreign
products that could be bought online. The last of the
government’s three-point proposal was what rankled
some consumers most because it effectively signaled
reliance on the government’s approved list for accepting
252
Haitao has become popular with the younger middle- or prohibiting foreign merchandise bought online.“It was
class shopper who takes advantage of the Internet kind of a knee-jerk reaction from the government: ‘Sorry
to search and buy from e-commerce sites based in if you are not on the approved product list, you are not
developed countries such as the U.S. and Germany. able to sell,’” said Ron Wardle, the Chief Executive Officer
The phenomenon actually started about ten years ago in China of ExportNow, which helps foreign brands
as a natural development of the 20 years continuous navigate cross-border e-commerce. “They got so much
economic booming in China. The middle class’s demand international media attention from this and said, ‘Wow
for a higher standard life needs to be fulfilled. Back then, this is bigger than what we thought.’” The result was that
most of the products were shipped through intermediary the government withdrew the list a few weeks after it was
shipping companies to transfer back to China since most announced and has been working with online retailers to
foreign e-commerce sites didn’t offer the direct shipping come up with a more tractable solution. The government
service to the China. “If you do not harmonize the rules promises the next iteration of the “positive list” in early
for commercial imports and cross-border e-commerce, 2018 (Chang).
there is an advantage you give to companies overseas,”
said Chan Wai-Chan, a retail partner at consultant firm
Oliver Wyman in Hong Kong. Companies that have
invested in actually having a physical presence in China
feel as though they’re being blindsided by businesses
that haven’t gone through the same expense of setting
up shop, he said. Wal-Mart, Costco, and Aldi are among
companies sharing in the $60 billion of sales that make up
the alternative channel, and their merchandise — some
of which aren’t approved for sale in shops in China — can
be delivered from bonded warehouses in designated
zones to consumers in as quickly as a day (Chang).
Over 58 million Chinese customers spent 7.5 trillion
yuan in 2017, according to iMedia Research. These
shoppers regularly spend 300 to a thousand yuan per
purchase. Alibaba still dominates the Chinese market
with a 70 percent market share, but the market remains
fragmented with no player getting more than 25 percent
of the total market. Japan is the top destination followed
by the South Korea, U.S. and Germany. Frequency of
purchase is surprisingly high with 65 percent of users
purchasing at least once a month and 11.6 percent do so
once a week. Orders of 1,000 to 5,000 yuan are extremely
common via cross-border WeChat stores (Graziani).
Products sold through these routes are also not
subject to the many Chinese taxes that are levied on that
same item sold through traditional channels, effectively
allowing brands to arbitrage against themselves,
according to Bloomberg. The government proposed
three changes in April 2016: a marginal tax increase,
limits on the volume of purchases to ensure transactions
are for personal use only, and a list of “positive” foreign
products that could be bought online. The last of the
government’s three-point proposal was what rankled
some consumers most because it effectively signaled
reliance on the government’s approved list for accepting
252
