Flourishing Online Cross-Border Trade
Sep 26, 2017

Cross-border e-commerce has become big business for a growing legion of Chinese mainland exporters and importers.

Buoyed by continuing incentives offered by the Central Government to expand the cross-border e-commerce business, many exhibitors at the July Guangzhou International Cross-Border E-Commerce and Goods Expo were optimistic about the future of the sector. In particular, they were banking on the likely popularity of several emerging categories, some of which are seen as having the potential to match demand seen in the mother-and-baby sector.

Many mainland consumers are becoming less price-sensitive when it comes to so-called haitao goods – items ordered via overseas e-commerce platforms – and are, instead, more concerned with product quality. Another change has been the growing popularity of emerging economies in Southeast Asia and Latin America as sources of foreign goods for many mainland online shoppers.

Overall, such developments have seen the value of the sector soar. In 2016, the total value of cross-border e-commerce conducted to and from the mainland stood at Rmb6.7 trillion (US$1 trillion), a 24 per cent year-on-year increase. This broke down into Rmb5.5 trillion in export transactions and Rmb1.2 trillion in import transactions.

Maturing Sector

Among the most high-profile exhibitors at this year's event was Guotong Logistics City, a Guangdong-based specialist in trading, logistics and e-commerce. According to Li Jiahua, a Senior Executive with the company, more pilot cities are now engaged in cross-border e-commerce, thanks to government support, while customs-clearance procedures have also been streamlined, encouraging more overseas companies to enter the mainland market.

Many overseas businesses previously relied on Hong Kong trading partners when looking to enter the mainland market. But the growth in cross-border e-commerce, together with greater transparency with regard to mainland trading practices, have resulted in many foreign companies becoming increasingly confident about trading directly in the mainland.

Mr Li cited the mother-and-baby products' category as a prime example of the way the cross-border sector is evolving. Typically, he said, mainland consumers based in the Pearl River Delta region had found it easy to buy such items in Hong Kong or Macau, although the quantities they could practically purchase were quite limited.

For consumers in other parts of the mainland, it was often more practical to call on the services of overseas agents, who shop on their behalf before posting the requested items back at a considerable mark-up. With the cross-border e-commerce sector maturing, however, there is no longer a substantial discount to be had by either buying in person or using overseas proxies. In fact, purchasing certain haitao goods through official channels may sometimes be cheaper.

Live and Fresh Produce

The range of commodities on show at the expo this year expanded considerably; from Thai latex foam pillows to essential Indian oils, by way of German refrigerators, Vietnamese prawns, Boston lobsters, Australian fish and Irish pork chops, were all on display.

"Chinese consumers now attach considerable importance to quality and have become far more health-conscious,” said Yang Chunhui, Sales Manager of Thailianwang (tlwshop.com), a Bangkok-based online marketing company that was exhibiting a wide range of Thai products. “As a result, they clearly love our Thai latex foam pillows, all of which are anti-bacterial, anti-mite, static-free, breathable and do not bend out of shape easily."

As well as supplying a pre-defined range of products, some exhibitors also offered to source bespoke products to suit the preferences of consumers. In the case of Khannajo-based Shiva Exports India, in addition to the wide range of daily commodities it offered – nasal sprays, eyelash enhancing serums, red oils, herbal hangover cures, herbal liver detox tablets, essential oils and assorted fragrances – it also can source other products a consumer might request.

In addition to growing demand for customised services, an other clear trend at this year's event was an increased consumer appetite for imported live and fresh produce. According to Mr Li, while mother-and-baby products remain Guotong's core offering, it has diversified into this rapidly expanding sector.

Last May, the company established a dedicated cold-chain division in order to directly supply mainland consumers with imported live and fresh produce. Guotong commissioned 1,000 specially made ultra-low-temperature refrigerated containers, each capable of carrying up to 30 tonnes of food.

The company has also added a chain of bonded and non-bonded sea-water aquatic farms into its mix, as well as establishing a -60°C cold chain to facilitate sales of imported fruit, aquatic products and meat. "It's a sign of just how much faith we have in the future of the cross-border fresh fruit and vegetables sector," said Mr Li.

Overseas Warehousing

While exporters from many of the countries that lead in the cross-border e-commerce sector, notably the United States, Japan, the United Kingdom and Germany, which have long had overseas warehousing facilities, major players in emerging markets such as China, India and Russia have now started to follow suit. One such operator is Lu Tong Logistics. Established in Zhejiang, the company now has offices across the mainland, as well as a warehouse in Zabaikalsk, a Russian town close to the Chinese border.

According to Yang Mei, the company's Sales Representative, its Zabaikalsk warehousing facility is twinned with a similar resource in Manzhouli, an Inner Mongolia-based mainland city located just 20 kilometres from the Sino-Russian border. This is said to give the company a competitive edge with regard to logistics and fulfillment in the far east and central Russian regions, areas where e-commerce spending is now said to exceed that of Moscow or St Petersburg. Such arrangements are said to have also benefited other Chinese cross-border e-commerce exporters, allowing them to cut delivery times, reduce logistics costs and improve the overall customer experience.

According to Ms Yang, e-commerce exports are now proving to be hugely popular on both sides of the China-Russia border. On the mainland, for instance, Russia-sourced confectionery and cakes are very much in demand, while Russian consumers have developed a particular appetite for China-originated electronics items, such as the bestselling Mi Robot Vacuum.