Cross-border e-commerce makes increasing portion of import trade in China; driven by surging Chinese consumers’ demand in an ever growing and open market environment

Published: 31 October 2018

The recent trend of comsumption upgrade in China has prompted a surge in demand for imported consumer goods. A growing number of international brands are seeking to tap into the Chinese market in order to capture these market opportunities. Deloitte China, the China Chamber of International Commerce (CCOIC) and AliResearch today jointly release the Chinese Imported Consumer Goods Market Report (the Report), which provides an in-depth analysis of the latest trends of the Chinese imported consumer goods market and essential insights for international brands that aim to access the China market.

According to Deloitte Asia Pacific Consumer Products and Retail Industry Leader Zhang Tianbing, "The report released by Deloitte China, CCOIC and AliResearch focuses on in-depth analysis of China's imported consumer goods market. It provides valuable insights to support the entry of more high-quality consumer goods from abroad into the Chinese market.”

Yu Min, Director General of ICC China Secretariat, CCOIC, adds, "CCOIC has always been committed to foreign trade promotion and international economic cooperation. In recent years, China's economy has grown steadily;consumer income has increased significantly; and consumer demand has been growing constantly. This has made promoting the expansion of imports and boosting consumption upgrade one of our priorities. At the same time, the rise of cross-border e-commerce platforms and the maturity of related business models provided strong support for meeting people's desire for a better life."

"China is becoming the biggest consumption market in the world and is increasingly open to international exporters. The government has continued to reduce import tariffs and introduce business-friendly policies for cross-border e-commerce businesses," notes Alibaba Group Vice President and Head of AliResearch Gao Hongbing. "In recent years, Alibaba has been the epitome of an open, flexible, universal, inclusive and modern global trade platform, enabling billions of consumers to buy globally and tens of millions of small and medium-sized enterprises (SMEs) to sell globally. The next wave of globalization will be driven by global SMEs and young consumers, leveraging digital economy infrastructure and digital business models. It will be a more inclusive and sustainable wave of globalization. This is also the China solutions derived from Alibaba's decades of experience in building internet infrastructure, which will realize the largest ever global output in China's business history in the last century and benefit the international market.

The report indicates Chinese consumers' income has increased significantly thanks to the sustainable and rapid economic growth in the country. In addition, consumer demand has also been unleashed by the continous development of infrastructure and abundant supply of consumer goods. China has enjoyed  steady growth in total retail sales, and is accounting for an increasing proportion of the global consumer markets. Meanwhile, China's online retail market—the world's largest e-commerce market—reached RMB7.2 trillion in 2017, an increase of nearly 32.2% from 2016. This huge potential is in large part due to the rapid growth of the digital economy.

China's cross-border e-commerce market has grown remarkably since 2014, with the import proportion of total e-commerce sales soaring to 10.2% in 2017 from 1.6% in 2014. The consumer base for imported goods via cross-border e-commerce has also expanded rapidly. AliResearch’s data shows the number of Tmall Global consumers grew ten-fold from 2014 to 2017. Stable development of retail goods imports under the bonded warehouse model and other gradually maturing operating models have transformed the cross-border e-commerce shopping experience. Last but not least, fulfilment time has been reduced by half, with the average delivery time from bonded warehouses going down to 4.5 days in 2017, from 9.2 days in 2014.

“Consumers are becoming accustomed to buying imported goods through the cross-border e-commerce channel, which has become a very effective channel complementary to the general trade model. As an alternative channel to meet imported goods consumption, it also stimulates significant  purchasing demand and diversifying product offerings to the Chinese consumer”, Zhang Tianbing says.

Looking into the future, young consumers are becoming a dominant consumption force, and more young people will start to buy imported goods. The internet-savvy post-1990 and post-95 generations already make up the largest consumer segment for imported goods, with their combined online spending accounting for 45.2% of the total spend in 2017.

Consumer demand has shifted from daily necessities to high-quality goods since 2016. On Tmall Global, for example, beauty products saw the highest year-on-year sales growth in 2016, and digital home appliances ranked top in 2017. Consumers’ desire for a better life focuses on three main categories: beauty (beauty products and apparel, health (health products and food), and home (digital home appliances and homeware).

As the consumer experience continues to improve, consumption of imported goods are increasingly becoming a new norm of daily life, resulting in comparatively less consumption ratio of imported goods on key promotions dates. “According to our research , over the past few years, number of transactions and items purchased by new users  keep increasing year-on-year after their first experience of purchasing imported goods through cross-border e-commerce”, adds Zhang.

The report also analyzes the pathways for foreign brands to enter the Chinese market. Currently, international retailers or brands can enter China either via traditional general trade or emerging cross-border e-commerce channel. Comparing to general trade, cross-border e-commerce, supported by more open and positive policies, provides easier access to imported goods and can help overseas products to reach to consumers directly and more conveniently, at relatively favorable tax rates. Most importantly, it has significantly reduced the lead time for foreign brands to enter the Chinese market.

Leveraging e-commerce platforms and big data analysis of the Chinese consumers, global brands are able to update their marketing strategies, sales channels and products regularly, all of which enhance their operational efficiency. China's unique digital environment has evolved from consumer preferences, technologies and diversified market players. Therefore, for global brands, stepping into China through cross-border e-commerce means more than just market expansion. It requires a combination of digital resources and approaches to connect and interact with consumers and satisfy their demands promptly, accurately and efficiently. In the meantime, they need to apply advanced technologies and data analytics in operations and management to boost efficiency and evolve with the digital transformation of China’s retail industry.