An Introduction to Offline Cross-border E-commerce

The emergence of cross-border e-commerce has enabled Chinese consumers to purchase foreign products in China with greater ease than ever before – the new import model cuts the red tape and lengthy procedures required for overseas retailers to register a China entity and apply for an import permit, making it easier for them to sell to Chinese consumers directly.

Consumers now have a legitimate avenue to purchase products directly from overseas retailers at an affordable price, whereas in the past many purchased from friends/family based overseas or individual daigou, agents who purchase products overseas on behalf of Chinese consumers and profit off the price difference.

And yet Tmall Global’s and Netease Kaola’s recent brick-and-mortar store openings in Hangzhou show that branching into offline retail is inevitable for pureplay e-commerce - both retailers and marketplaces alike. The reasons are clear - as e-commerce user growth slows in a maturing market, traffic acquisition and online marketing operations become increasingly expensive. There is only a limited amount of time that internet users spend online in a given day, and retailers have to spend more and more money to get a piece of that time.

International e-commerce players are moving to offline retail in China, in order to reach consumers who have yet to begin purchasing overseas products, or who are looking for more convenience or a way to try out the goods before they buy. In today’s competitive market, brands are also looking for a physical space in which they can build a stronger connection with their target customers.

What's holding back the offline retail expansion of cross-border ecommerce?

The issue with taking cross-border e-commerce offline lies within the very nature of the regulation that dictates how it works – all products imported via cross-border e-commerce are regarded by Chinese customs authorities as personal artifacts, which means that there needs to be an authentic consumer to pay for the products and authenticate the order with their personal ID card, transaction records, logistics information, and payment serial number when the product is imported.

Because of all the paperwork and information needed for an order to go through, it is difficult for retailers  to completely fill a brick-and-mortar store with cross-border e-commerce goods that they can sell to consumers in a hassle-free transaction. It is much easier if the products are imported via general trade, as the authorities don’t have to worry about illegal transactions going through untaxed and consumers don’t have to submit so much information to government authorities.

However, e-commerce companies and retailers alike have been lobbying for offline cross-border e-commerce stores for quite some time, as demand for overseas products has risen considerably and retailers are seeking a way to reach Chinese consumers without having to deal with importers and distributors in the middle.

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