How Cosmetics Companies Can Benefit from Chinese Cross-Border E-commerce

OKOMP Marketing • 13 July, 2015

2014 marked the official start of Chinese cross-border e-commerce, and it is becoming a way for international brands not yet in China to enter one of the most attractive and high-potential markets in the world.

Chinese cross-border e-commerce has attracted a significant number of investors, traditional retailers, international e-commerce giants, start-ups, logistics companies, and suppliers, all of which want to benefit from the new policy, either to enter the China market or further grow their existing businesses in China.

How can cross-border e-commerce benefit international cosmetics companies that wish to enter China’s competitive cosmetics market?

Chinese cross-border shopping market overview:

18 million cross-border shoppers with £14 billion sales in 2014, expected to reach hundreds of millions by 2018.
500 million middle class online shoppers with growing demand. They are looking for product safety, good quality, variety and value when they spend.
The increasing number of outbound tourists and overseas Chinese citizens have increased overseas brand awareness in China and have helped people around them execute cross-border shopping.
The average age of cross-border e-commerce consumers is 25-44 years old. 74% of them are mobile shoppers.

Chinese online consumers:

Price is a primary consideration for consumers buying online. However for apparel and cosmetics, the quality and authenticity of products is more important. Chinese consumers are willing to pay higher prices for shops that offer these traits.

There is generally low customer loyalty. Rather than stick to one brand, Chinese consumers tend to buy different brands and are willing to try new products. This gives new companies to the market opportunities to grow.

Chinese consumers can be difficult to convince. Chinese shoppers do lots of online consultation before they make a decision. It is important for companies to have online exposure, positive online reviews, good reputation, stories and useful content to convince the consumer to buy your product.

What does cross-border e-commerce mean for cosmetics companies?

Entry barriers to the China market are lower than traditional e-commerce or retail
No animal testing required
Lower duties, no VAT
Supervised by China customs, process is transparent, no fake products
Shipping costs are lower
Shipping times are shorter

How to get ready for Chinese cross-border e-commerce?

Increase brand awareness in Chinese community, build up reputation, and drive traffic to online platform
Chinese online platforms that sell to China. Can be M2C (such as Tmall) , B2C (JD, Jumei, miya) or direct sell from brand online shop (need to have a Chinese-language, properly localised e-commerce website).
Online payment (better to support some major Chinese online payment methods, such as Alipay, UnionPay)
Logistics: UK to China, within China
Chinese customer service support, product return and exchange
Social media and online reviews

There are two ways to bring products into the China market:

Bonded warehouse (beihuo): No sales order before products arrive at the portal. Ship to clients from free trade zone or tax free zone. Product ship to client faster, total shipping cost is lower.
Direct, ship directly to customers after order: Easier to manage, but shipping times and costs will be higher.

Range of e-commerce platform fees:

Refundable deposit: $25,000- $40,000 (USD)
Annual rental fee: $5,000- $10,000 (USD)
Sales commission: 2-10%, depends on product, cosmetics normally 5%
Logistics/warehouse charge: 5-20%, depends on product
Banking fee: 1-1.5%

It is never easy to enter a new market. However, compared to the traditional way to register trade in China, cross-border e-commerce is the best and most cost-effective way to enter the China market. The Chinese government is still exploring the best practices for cross-border e-commerce, but it could be the best opportunity to enter China’s cosmetics market and reap all of the potential benefits.

If you have any questions, please feel free to contact me on: [email protected]