At $5.8 trillion last year, China has the second-largest retail market in the world. We’ve dedicated ourselves to helping domestic and international brands unlock this opportunity.
Going into 2020, the start of a new decade, we’re revisiting routes to market for international brands into China. Our first stop:
Cross-border e-commerce in China holds a specific distinction. International companies are allowed to sell certain goods to Chinese consumers online, through platforms such as Alibaba’s Tmall Global and Kaola, at preferential duty rates and without a license to operate a business in China. As you can imagine, that’s a significant reduction in red tape. It also lowers the cost of doing business in China.
According to a new report from Deloitte, the cross-border channel in China saw a compound annual growth rate of 76% between 2015 and 2018, while generating RMB 78.5 billion in gross merchandise volume (GMV) last year. That’s around 2.2% of China’s online retail sales. This means there is substantial room for long-term growth for brands and retailers.
What’s driving this growth?
An enduring desire for imports. Analysis by Bain & Kantar shows in the first six months of 2019, imports grew 10%, close to twice the rate of overall FMCG growth. China’s consumers are looking for high-quality foreign products to meet their aspirations for progress in looking after themselves, their families and their pets.
1. Alibaba’s commitment to cross-border e-commerce:
We think the following will have a big impact on China’s cross-border e-commerce landscape in the coming year:Last year, Alibaba said it would import $200 billion worth of goods to China by 2023. Alibaba also opened up its wallet and spent $2 billion to acquire NetEase Kaola, China’s second-largest cross-border e-commerce platform. Alibaba will integrate Tmall Global with Kaola to strengthen its dominant cross-border e-commerce market position.
2. Strong Demand Trends in Mother & Baby, Beauty and Pet Care:
Although domestic brands are enjoying a renaissance, popular import categories continue to grow at a blistering pace. We’ve written before about opportunities in mother & baby, beauty and pet care. These are the most significant and fastest-growing cross-border e-commerce product categories. The window of opportunity for these categories is now, and we encourage you to expedite strategic initiatives to enter these categories.
3. New Sales Formats and Rhythms:
China’s e-commerce event calendar gets more interesting every year, with a range of sales events. As we’ve explained before, these events aren’t just about sales – they’re a way to test-and-learn from adjustments to price and assortments. Outside of sales events, livestreaming will continue to be a way to put niche imported brands in front of China’s consumers. In the three months ending in September, GMV on Tmall Global generated through livestreaming reached RMB 470 million, up from RMB 62 million a year ago.
4. Successful Market Entry Cases:
The number of successful cross-border market entry cases is increasing. International brands are encouraged by positive signals from brands such as Swisse (multivitamins), Aldi (European grocery retailer) and Little Freddie (organic baby food), which leveraged cross-border success to win significant in-country distribution. AgencyChina has also contributed to client success through the cross-border channel, working with our partner HollandatHome to test the market and craft China strategies for brands.
In all, the team at AgencyChina is incredibly excited about the cross-border e-commerce channel in China. If you share our enthusiasm, and would like to know more, book yourself in for a chat with one of our in-market consultants.