China cross-border e-shopping market to surpass US$125b in 2018

China's cross-border e-commerce market will grow to US$125b this year, a new report predicts (Image xijian / iStockPhoto)

Cross-border eCommerce purchases from a retailer located outside China are set to reach US$125 billion this year, according to a new research report.

The Cross-border eCommerce (Haitao) Opportunity in China report, compiled by Frost & Sullivan, in partnership with China retail strategy expert Azoya Consulting, includes research amongst over 1,000 online shoppers in China, together with findings from interviews with over 100 international retailers and brand owners.

"The research revealed the strong interest and expenditure amongst Chinese consumers in buying online from overseas retailers, with the average online shopper in China spending almost US$850 per year on purchases from overseas retailers," said Mark Dougan, Consulting Director, Asia-Pacific, Frost & Sullivan. "Our research indicated that Chinese consumers are significantly motivated by the perceived higher quality and lower risk of buying fake goods that overseas retailers offer." 

The research also revealed strong growth in online cross-border shopping with 63% of Chinese shoppers planning to increase their spending in 2018 compared to 2017.

Fashion is the top category bought from overseas retailers (bought by 22% of online shoppers in the past month), beauty and cosmetics (20%) and mom and baby (15%).

Japan is the overseas origin country that Chinese online shoppers have most confidence in (72% having confidence in Japanese vendors), followed by South Korea (60%), the US (55%), Australia (37%), France and Germany (both 26%) and the UK (23%).

Women are higher cross-border online shoppers than men, spending US$976 on average per year, which is 20% more than men. Men seek fast delivery, whilst women seek Chinese language customer support, and relevant content on the supplier's website. Women are more likely to use an overseas supplier's standalone direct-to-consumer website (21% vs. 18% of men).

Whilst Chinese consumers are significantly increasing their cross-border online shopping, international retailers often report challenges in successfully exploiting the market opportunity in China. Over recent years, China has opened up its domestic eCommerce market to international vendors through initiatives such as free trade zones, and over 80% of global retailers now see China as an attractive market opportunity. However, only 30% of online retailers are satisfied with their current level of sales in China.

This is particularly the case for those using Chinese marketplaces as their online channel, where only 21% of retailers are satisfied with their current level of sales. Challenges of these marketplaces include the plethora of competing brands, intense price competition, margin-eroding commissions and high upfront costs. Consequently, the research revealed that increasingly retailers are looking to set up their own standalone web stores for the Chinese market.

China's online market may be vast, but it can also be confusing and is highly competitive. Consequently, global retailers need to think carefully about the right way to approach the market, the report states.

"To build a brand that Chinese consumers trust, which commands a healthy profit margin and repeat buyers, retailers need to approach customers through multiple touchpoints. The key channel should be within retailers' control, accompanied by supplementary platforms," said Don Zhao, Co-Founder of Azoya International.

"More and more retailers are establishing standalone websites as the core of their strategies, as these sites directly connect retailers with Chinese consumers who desire foreign brands, while empowering retailers with flexibility and control over their business."

First published in Retail Tech Innovation