BLOG: Cross-Border E-Commerce Considerations for European SMEs

23/12/2016

E-commerce is hugely popular in China, not only has it ushered in an era of abundance of choice and convenience for the Chinese consumer, but also provided relative easy access for Western companies to the largest market on earth. Joining one of many e-commerce platforms, however, it isn’t as straightforward as many China e-commerce seminar speakers would have you believe; at least, not for the majority of SMEs. Whereas many big foreign brands have flagship stores on domestic platforms, very few SMEs can claim the same. The fact of the matter is that strict admission requirements, high fees and commissions have been making it very difficult – legally, financially and operationally – for smaller businesses to participate. This is changing with the development of cross-border e-commerce.

Cross-border e-commerce

In a move to better protect consumer interest, strengthen monitoring of product safety and safeguard national tax receipts, the Chinese government set up cross-border e-commerce pilot zones in several mainland cities and Free Trade Zones. The move from the government to support cross-border e-commerce was welcomed by Chinese consumers and foreign businesses alike. 

In this short time, we have witnessed a surge in cross-border platforms and an increasing number of consumers using these platforms. The Chinese government is working hard to facilitate cross-border shopping and promoting the industry abroad. Furthermore, efforts are being made to make cross-border e-commerce more transparent and safe, for both consumers and international businesses.

We have also seen that cross-border platforms put forth less demanding admission requirements, and offer more flexible cooperation models, making it easier for smaller foreign businesses to join. Be that as it may, the cross-border e-commerce market has rapidly become dominated by Tmall Global and JD Worldwide, the cross-border platforms of the two biggest e-commerce players in China. Moreover, both Alibaba and JD are seeking to secure their dominance by opening offices in Europe and the US in an effort to attract Western businesses to sell their brands to the Chinese consumer. 

Now, Alibaba/JD business development managers roam China e-commerce seminars in order to find potential customers, but these will seldom be SMEs as – in reality – it is far from cheap to start a web shop on either cross-border platform, considering deposits, annual fees, commission, etc. Besides, they still expect you to arrange your own Chinese customer service, have a Chinese return address, etc. 

Choose the right cross-border e-commerce platform

There are however numerous other (smaller) cross-border e-commerce platforms to choose from, all of which focus on certain specific product categories, such as baby products, food & beverages, electronics, etc. You can also choose a B2C business model or alternatively a B2B2C model.

In conclusion, is it still possible for European SMEs with limited budget to sell via cross-border e-commerce? Yes, absolutely! But, it is fundamental that you choose the right cross-border platform for your products, select the right partner and choose the right business model.

MyChinaWeb has over 20 years of experience doing business in and with China, so please don’t hesitate to contact us for more info on this topic! For more background information, please also check the blog of 31 May 2016 on the Horsten International website at the following link.