Workers sort out packages on the octopus-shaped picking-and-sorting station at Amazon China's Tianjin Fulfillment Center (COURTESY OF AMAZON CHINA)
Yan Yan, an art teacher in her 30s living in Hefei, east China's Anhui Province, recently bought a pair of Asics running shoes from online retailer Amazon's U.S. site. "It's the discount season in the United States. The shoes only cost me $94.99 plus a $10 charge for shipping and handling," she said. The same pair of shoes is sold at around 1,200 yuan ($193) in China. Yan also made purchases for her child from Amazon.
Yan is among a fast-growing number of Chinese online shoppers, most of whom are young, well-educated and eager to buy foreign brand products that are unavailable or more expensive in China. Baby products, footwear and apparel are their favorites. Amazon's global sites are often their preferred platforms for shopping. "I trust the good quality and authenticity of things bought from Amazon," Yan said.
According to consulting company Analysys International, imports in China's online shopping market exceeded 80 billion yuan ($13 billion) in 2013, up 75.2 percent from the previous year, and could exceed 120 billion yuan ($19 billion) in 2014. Statistics also show that 50 percent of the overseas purchasing orders made by Chinese online shoppers in 2013-14 took place on Amazon's U.S. site, which, along with five other Amazon global sites, have provided direct shipping service to China since last November.
However, the U.S.-based multinational e-commerce giant, despite its 11-year presence in China, has yet to grab a significant share in the country's sizzling e-commerce market. According to data from Analysys International, the transaction value of China's business-to-customer (B2C) market reached 1.37 trillion yuan ($220 billion) in 2014, soaring 65 percent year on year. Although Amazon ranks fifth among all online retailers, it only gained a tiny market share of 1.8 percent, compared to the 54.6 percent Tmall.com, Alibaba's B2C platform, had and 17.7 percent claimed by JD.com.
According to a report jointly released by Alibaba and Consulting and technology services company Accenture in June, the transaction value of China's cross-border e-commerce platforms totaled $21 billion in 2014, and it is expected to soar to $245 billion by 2020, making China the world's largest cross-border B2C market. By then, it will have more than 200 million cross-border online consumers.
The impetus behind the thriving of cross-border e-commerce comes both from consumers' enthusiasm and the government's policy support. The Chinese Government issued several measures to facilitate the process of cross-border transactions, involving customs clearance, quarantine inspection, tariff treatment and foreign exchange payments.
"We have many reasons to believe that cross-border e-commerce is entering a golden age in China," said Doug Gurr, President of Amazon China. "Cross-border e-commerce has become a strategic direction of our business. Depending on our advantages in global resources and logistics, we'll spare no efforts in promoting cross-border e-commerce in China."
Last November, the Amazon Global Store was launched on the company's Chinese site, which localizes shopping experiences for Chinese consumers, enabling them to buy international selections directly from Amazon's global websites out of China. The Amazon Global Store is offering 3 million products under 38,000 international brands, and its sales have grown more than 300 percent so far this year.
To satisfy various demands of Chinese online consumers, Amazon also directly imports popular products for Chinese customers. Brandy Niu, Vice President of Amazon China, told Beijing Review that their direct-import team in China collaborates with colleagues in other countries to source those products directly from their origins or brand dealers. "All unnecessary intermediary links will be cut off, so that the products can be sold at the best price and be delivered with the fastest speed," she said. So far this year, the number of directly imported products has doubled the number during the same period of 2014 and sales tripled.
The Chinese Government's decision to establish free trade zones (FTZs) in Shanghai, Fujian Province, Guangdong Province and Tianjin has also brought opportunities to cross-border e-commerce companies, which are gearing up for setting up warehouses and offline showrooms in FTZs.
Amazon China established strategic partnerships with the Shanghai FTZ in August 2014 and with the Xiamen area of the Fujian FTZ last May. According to the Shanghai Customs, as of April, Amazon's imports had accounted for 90 percent of the total imports it handled. Amazon has launched a store selling Taiwan products in the Xiamen FTZ, featuring more than 5,000 selections from approximately 500 Taiwan brands.
China's thriving cross-border e-commerce market has left e-commerce companies, foreign or domestic, large or small, all rushing for a piece of the action. Alibaba and JD.com are catching up.
Last November, Alibaba teamed up with U.S. retailing giants including Macy's, Bloomingdale's, Saks Fifth Avenue and Neiman Marcus. Chinese consumers can shop on those U.S. websites and pay in the Chinese currency yuan through Alibaba's payment service Alipay.
In May, Tmall opened a pavilion for small and medium-sized South Korean companies to sell authentic products such as cosmetics and apparel directly to Chinese consumers. On June 24, Alibaba announced an expansion of its cross-border business--the launch of 11 country pavilions on Tmall Global, an extension platform of Tmall, which will provide Chinese consumers with a one-stop shop for popular commodities from the United States, New Zealand, Australia, Switzerland, France, Britain, Spain, Singapore, Thailand, Malaysia and Turkey.
On April 15, JD.com also announced the launch of its cross-border e-commerce platform JD Worldwide, through which Chinese shoppers can order goods from hundreds of brands and sellers in overseas markets including Australia, France, Germany, Japan, South Korea, New Zealand, the United Kingdom and the United States.
JD Worldwide is fully integrated with the existing JD.com platform. Customers can place orders seamlessly through JD's website and mobile applications. As part of the JD Worldwide's launch, the company also announced a partnership with eBay, whose channel on JD Worldwide will showcase a variety of popular brands at attractive prices from eBay sellers in the United States.
Amazon China said that it will continue upgrading the Amazon Global Store. The company has added the Amazon Global Store service into its mobile application. It will also expand selection. "We've covered all the categories on the U.S. site that can be directly shipped to China and accumulated experiences for us to expand our selections to the world," said Niu. "Through our localized shopping experiences, Chinese consumers can stay at home and shop around the world."
Products, sources and logistics all matter for cross-border e-commerce.
Amazon's unique advantage in developing cross-border business lies in its global logistics system, including a distribution network across China, Niu told Beijing Review. It has 109 fulfillment centers worldwide, which can ship goods to 185 countries and regions.
In China, Amazon has established the largest fulfillment network out of the United States, with fulfillment centers set up in 13 large cities that provide same-day or next-day delivery services to 1,400 county-level regions.
Seamless connection between Amazon's transnational delivery system and China's delivery team can ensure a product reaches the consumer in an average of two weeks, said Niu. Sometimes, it can arrive in three working days.
On July 20, JD.com announced the launch of a U.S. Mall at the JD Worldwide platform, where Chinese customers can buy authentic U.S. products. It also signed a partnership agreement with the world's leading freight forwarder DHL Global Forwarding, which will become JD.com's preferred logistics service provider for products imported from the United States.
"The only way for the e-commerce industry to have sustainable growth and long-term success is to back to business fundamentals, which focus and innovate based on customer needs," wrote Amazon China President Gurr in a signed article.
Those fundamentals are rich selection, trusted product quality, transparent price and fast cross-border delivery capability, he explained.
Owing to the intense competition between Chinese and multinational e-commerce companies, in the days to come, Chinese online or mobile shoppers--not only young, well-educated shoppers like Yan but also those who cannot read foreign languages--will have a wider selection of foreign products and enjoy a more convenient experience and discounts, as well as faster delivery.
Copyedited by Kylee McIntyre
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