Useful information for SMEs on how to enter the Chinese market through cross-border e-commerce

1. How to do cross-border
e-commerce in China

2. China is the number
one e-commerce
market
• 2019 - $1.5 trillion -> 2023
- $2.6 trillion (compound
annual growth rate of
13.3%)
• Mostly on mobile devices
• 72% of the users are
below 39 years
• 260 cities with a
population of over 1
million

3. What is cross-border
e-commerce (CBEC)?
Cross-border e-commerce is the purchase of
goods from foreign companies on an online
marketplace platform. This means that brands
can sell and ship products directly to Chinese
consumers, through special customs
clearance regulations that are different from
those of general trade.
Foreign brand owners can stock goods in their
home countries or in the free trade zones in
China, reducing the inventory risk of
exporting to China and stocking them in
Chinese warehouses. The VAT, customs fees,
and delivery fees are passed on to the
customer.

4. Latest regulations
(January 2019)
• single-transaction amount increased
to 5,000 RMB (727 USD)
• annual amount increased to 26,000 RMB
(3,782 USD) per individual
• 63 new items categories were added to
the positive list for CBEC (including
sparkling wine, beer, health care products,
fitness equipment)

5. Chinese consumer profile
• young, free-spending consumers in
lower-tier cities
• most consumers say they are looking
for a healthy lifestyle
• more sophisticated travelers looking for
foreign brands in China
• main decision-making source is word of
mouth

6. What costs are
to be covered
to start cross-
border e-
commerce in
China?
Even if the costs are lower than doing general trade in China, there are still costs
to be considered when doing cross-border as well. The costs to be considered
will cover for:
Creation and maintenance of internet platforms
Design, update, and optimization
Generating traffic
Warehouse management system and warehouse for storing products
Transportation management system and shipping
Marketing campaigns
Staff In charge of all processes

7. Cross-border model 1:Delivery from a
Free Trade Zone (FTZ) warehouse of
BrandHouse in China (“1210”)
• the product storage is located close to the
consumer in a Free Trade Zone (FTZ) warehouse in
China
• specially meant for fast-moving products that need
to be delivered fast to the Chinese consumers (1-3
days)
• The brand and BrandHouse together develop a Go-
to-Market Plan for China and determine the
minimum stock level required in the FTZ warehouse
• BrandHouse arranges for product registration and
customer clearance
• the products are picked, packed, labelled and
shipped to the buyer or consumer in China upon an
order (driven by actual sales) and we can offer
next-day delivery

9. Cross-border model 1:Delivery from the
Central European warehouse in Germany
of Brandhouse (“9610”)
• the storage of the products is in BrandHouse’s European warehouse in
Flensburg (Germany)
• suitable for products Chinese consumers not necessarily need within 1-2
days after ordering; introducing new products to the Chinese market
and testing what sells well and what not
• the brand owner and BrandHouse together develop a Go-to-Market Plan
for China and determine the minimum stock level required in the
Flensburg warehouse
• BrandHouse arranges for product receipt and registration
• the products are picked, packed, labelled and shipped to a Beijing
customs warehouse in China upon an order (driven by actual sales)
• In the Beijing customs warehouse BrandHouse takes care of product
customs clearance and then uses local express for the last-mile delivery
to the consumer in China

11. General trade in
China
• import or export of goods by enterprises in China with import-export rights
• If no business license, need to have an intermediary that on their behalf will import the
goods from abroad
• this legal entity clears customs and pays taxes and duties before the product has been
actually sold
• products are usually sold in brick-and-mortar stores
• high risk of paying for and storing products which may not get sold
• Intermediaries charge more due to high risk

13. BrandHouse is a cross-border parcel delivery business facilitating cross-
border sales to China on behalf of FMCG brand owners and offers a
proprietary and robust multi-channel e-commerce infrastructure to provide
a complete end-to-end solution including
• cross-border logistics and warehouse
• technical integration
• customer service
• local China organization
• customized go-to-market strategy for foreign brands