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Before the current trend towards official B2C channels, CBEC to China was mainly the domain of purchasing agents, called daigou. Via C2C platforms, such as Taobao , these purchasing agents sell small quantities of overseas products, which they acquire from abroad directly. These products (e.g. milk powder) are then sent to the customers by direct mail, without paying any import duties or passing mandatory customs inspections as would be the case with normal trade.
According to iResearch Global, in 2012 the ratio of online retail sales of imported goods via C2C vs. that of B2C channels was 98.9% vs. 1.1% respectively. Only four years later, in 2016, this ratio was 43.6% for C2C vs. 56.4% for B2C.
B2C online channels for foreign brands in China
1) Official websites located outside of China
Selling products directly to China via a website hosted outside of China might seem like the most convenient and cheapest entry option for brands that don’t have a legal entity in China. However, the chances of success in China with a foreign standalone website are very limited. Sales traffic is already monopolized by big Chinese e-commerce platforms. Creating one’s own traffic is even more costly than being active on those platforms. Due to internet restrictions, even if the website is translated into Mandarin, Chinese e-consumers are unlikely to find the website. Moreover, if Chinese consumers can find the website, issues with after-sales support, refunds, exchanges and compatibility with Chinese payment methods (e.g. UnionPay) makes direct selling from abroad nearly impossible. In addition, few Chinese consumers are willing to bear the delivery risks of this kind of CBEC. Therefore, this model is not a viable option for foreign merchants that want to enter the Chinese e-market.
2) Online malls
Online malls are large, well known, marketplaces where e-customers can roam around to select items from different independently operated shopfronts (stores). Unlike websites like Amazon.com, they provide a centralized platform where goods from a variety of individual shops can be purchased from a merchant directly with a single transaction via the website checkout system. The most famous examples of online CBEC malls in China are Tmall Global and JD Worldwide. However, the set-up fee is high, reaching $50 thousand USD. The online malls also charge commission fees on every product sold.
3) Online hypermarkets
Online hypermarkets, such as Kaola and Jumei, purchase a large variety of popular goods directly from overseas companies and add them to their own product assortment. As a result, they only have one shopfront instead of individual brand shops. However, these hybrid platforms tend to focus on certain categories and brands so they may not be an option for businesses and brands outside of these categories.
4) Vertical specialty marketplaces
Marketplaces like Xiaohongshu, focus on specific product categories, target audiences or geographical regions. Although the exposure is lower and the product catalogue is limited, specialty marketplaces provide brands in niche-markets with a valuable opportunity to sell goods which would likely remain under the radar of consumers on large e-commerce platforms. Consumers in specialty marketplaces tend to focus more on quality and have higher conversions into sales.
5) Flash sales online stores
As consumers go to these sites (eg. vip.com) to hunt for the newest overseas gadgets, flash sales sites can be an effective trial tool for foreign merchants to test their products in the Chinese market before venturing into more substantial cross-border e-commerce activities. At the same time flash sales websites can be considered an effective marketing tool to give more exposure to one’s brand. However, profits are potentially lower so long-term collaboration is not recommended.
6) WeChat Stores
WeChat Store is an online e-commerce platform within WeChat. Foreign brands can open a store without registering as a legal entity in China. It’s good for customer relations management, newsletters and sales promotion. However, it takes time to grow followers and has rather low exposure.
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Much of the content for this video was sourced from the recent China CBEC Guidebook by the Consulate-General of the Kingdom of the Netherlands in Shanghai. The full report can be found here http://bit.ly/2xxhGer.