Skip to main content

The Ultimate Guide to Cross-Border Ecommerce in China: Selecting Supply Chain and Logistics

If I ask you which part of your cross-border e-commerce business in China is the most important, what would you say?
You may instinctively say marketing, advertising, establishing the right partnership, taxes, protecting my IPs, or even sales and conversion...
But if you really think about it, none of those matters until you have your supply chain setup properly and shipping logistic down packed.
In the previous two Ultimate Guide to Cross-Border Ecommerce in China, we have gone talk extensively about the history of Cross-Border E-commerce in China and how to choose the right platform. In this article, we’re going to dig a little deeper and talk about all the ways you can establish your supply chain and logistics for your cross-border e-commerce business for China.

4 Ways to Establish Your Supply Chain for Cross-Border E-commerce in China

If you’re ever planning to set up a cross-border e-commerce store selling to China, you’ll first need to figure out where you’re going to get your supplies from and then how to establish an efficient supply chain. Below are 4 different ways you can establish your supply chain, you can use any one of them or use a mixture of 2 or even 3.

Distributor
If you’re planning to retail multiple different SKUs to China, then finding distributors for multiple brands may be a good option for your initial supply chain. The only downside to working with distributors or agents you’ll incur a higher cost compared to directly purchasing from manufacturers. The benefit, however, is that most distributors may carry multiple different brands and SKUs and will usually allow you to purchase smaller quantities compare to manufactures.
Manufacturer:
For brands who are selling their own products on TMall Global or JD Global, they will often have their own manufacturing supply chain. The benefit of going directly to manufactures is that you’ll often pay the lowest price per product since there is no other middleman to mark-up the items and you will usually be able to scale your supply of products should the demand becomes very high.
The downside, of course, is that you’re usually limited to only a small amount of SKUs and will have to purchase in large quantities.
Department Store
I know this may sound odd to westerners and you’re probably thinking why would department stores be part of my supply Chain but this is actually how it works with Cross Border Ecommerce in China. Merchants on cross-border platforms such as Ymatou will often be individuals Chinese living abroad and since they don’t really have any purchasing power or connection to distributors they will often just purchase their supplies directly from large departments stores such as Costco and resell these products to Chinese consumers in China with a small mock-up.
This is usually for very early stage cross-border e-commerce business who has very little purchasing power. We do not recommend this method as the disadvantage of using this supply chain is obvious. Since you’re purchasing directly from department stores you’ll usually have no price advantage, unsure if the product will be in stock, and not to mention all the legal problems you may encounter because of product defects.
International Buyer (Daigou)
Some of you may have heard of the term Daigou, but for those of you who have no idea what Daigous are let me explain. The term Daigou literally translates to “buy for me”, and they are really just individual Chinese who are living abroad. Daigous usually purchase products directly from department stores or sometimes distributors and then resell them to other Chinese consumers living in China. These will usually be family and friends, but some daigou may have acquired a large network of buyers on WeChat and are doing very well.
The way Daigou will fit into your supply chain is as follow. Let’s say you open up a store on Ymatou and you want to sell multiple products (SKUs) from all over the world. Now, of course, you’re not going to have the purchasing power of Walmart nor the ability to connect with distributors in each of these countries and this is why you would want to establish a Daigou supply chain.
Since there are many Chinese Daigou in various of cities all across the world you can literally purchase all sorts of products from them and resell them on your cross-border platform. The downside to using Daigou is you’ll run into legal and custom clearance issues.

How to Choose Your Cross-Border E-commerce Logistics for China

There are really only 2 ways that you can deliver your products to the hands of the Chinese consumer. You can either use direct shipping or pre-ship a bulk of your products to something like a bonded warehouse. Both ways are viable options and both have their positive and negative.
Using Direct Shipping

The idea of direct shipping is pretty straightforward. This is where the owner of the cross-border shop/platform would ship the products directly to the Chinese consumer upon purchase.

The key advantage of going for a direct shipping strategy for your cross-border e-commerce logistics is that it will allow you to sell more products (SKUs) on your platform since you’re ultimately only shipping when the order has been placed by the customer in China.
Most C2C cross-border e-commerce platforms in China such as individual Weidian are mostly going to adopt the direct shipping. Where on platforms such as Ymatou some merchants will offer direct shipping and other use more of a bonded warehouse method which we will cover more in details below.
The downside to using direct shipping as you’re your method of getting your products to the consumer's hand is you’ll risk hindering customer experience of your brand. Since you could be shipping your product from across the world it is highly unlikely that you can compete with a local competitor on the speed of shipping and customer experience in this aspect.
On top of that directly shipped products are often treated like personal parcels at Chinese border and will usually take a little longer to clear custom. With that being said, there are actually 3 different ways of shipping your products directly into China.
Personal Parcel
The first and the most common method of direct shipping is of course personal parcel. The benefit of shipping your products as personal parcels is that you do not need to register or apply for any licensing with the Chinese government as your parcel will be considered to be a personal gift. This is great news if you’re selling hundreds of SKUs and you don’t want to worry about applying for registration or licensing for each and every product.
The downside, however, is that since your products are going to be treated as every other personal parcel it will usually incur a much higher duty which can range anywhere from 15% to 60% depending on the type of product you’re selling. And there you will have the risk of your product being held by Chinese customers due to clearance.
Express Mail Services (EMS)
Express Mail Service (EMS) is an international express mail service that was established by the Universal Postal Union (UPU) back in 1998. The sole purpose of EMS is to establish and promote international postal services worldwide.
The benefit of using EMS is that it is highly administered, efficient, fast, and depending on the country you ship to duties may be exempted. For China parcels shipped via EMS will usually clear custom easier and often without inspection. This means that you are only going to have to pay for duty if your parcel was randomly inspected.
BC Direct Shipping
BC Direct Shipping is another for of Overseas direct mail services that are specifically designed and supported by the Chinese government. This type of direct shipping method only applies if you’re selling Cross-Border to China.
The benefit of using BC Direct Shipping is that it is very fast, stable, and follows strict procedure layout by China PRC’s regulations. As a merchant going through BC clearance you’ll provide your “three in one” which are your order info, payment info, and logistic info to the Chinese custom for review. On top of that, the products must comply and registered under a whitelist provided by the government.
The downside to using BC Direct Shipping is that not every postal service will offer such as service. Generally most Chinese operated postal services such as STO (申通快递) will offer this service.
Pre-shipping to a Bonded Warehouse

In our previous guide, we’ve briefly defined and explained the idea of bonded warehouse and the role it plays in Cross-Border Ecommerce in China. The idea of bonded warehouse or bond is pretty simple, it is full-service warehouse usually appointed by government officials or sometimes private enterprise that allows dutiable goods or products to be stored, undergo manufacturing operation, and manipulation without having to pay the duty upfront.
Unlike direct shipping, using bonded warehouse will usually require the merchant to carry an upfront overhead of storage, warehouse management fees, and uncertainty of exchange rates.
The benefit of using a bonded warehouse is that of a lower shipping cost since you’re not shipping in bulk, a much better customer experience since your product is ready to be shipped localed, and finally easier returns for both you and the customer.
It is worth to mention that not all bonded warehouse will allow prolong payments of duty on your imported goods unless it is located in a free trade zone. However in China most bonded warehouses are located by the sea and in free trade zone such as Ningbo, Guangzhou, Shanghai, Shenzhen etc.

Comments

Popular posts from this blog

How Baidu became a despicable internet giant

Every businessman who wants to market to China heard about Baidu. Baidu is a leading Chinese web service company which is situated in Beijing, Haitian district. It is established by Robin Li and Eric Xu in the year 2000. Both of them are Chinese and they have studied and work overseas before they come back to China. Presently this is one among the largest Internet companies all over the world. Baidu is offering various services and a Chinese search engine for the websites images and audio files. Baidu offers around 57 search community services and a keyword based form for discussion for the people. Growth of Baidu In 2003 Baidu has launched search engines for pictures and news by adopting a Unique Identification Technology. As of 2006 this company has provided index for around 740 million web pages 10 million multimedia files and 80 million images. The company Baidu offers multimedia contents such as movies and MP3 music. In fact this is the first company in China to offer mobile searc…

The Ultimate Guide to Cross-Border Ecommerce in China: History and Scale

With the rise of the internet and exploding growth of the China e-commerce in the last 20 years. More and more foreign brands are becoming interested in selling their products directly into China using eCommerce platforms.
The challenge, however, is that China is not exactly a walk in the park for foreign brands. It has complex regulatory policies and vastly different eCommerce ecosystems. This is why, as a foreign brand who wants to sell to China using cross-border e-commerce trade it is critical to understand the latest market trend, political policies, and financial insights.
In this ultimate guide to Cross-Border eCommerce in China, we are going to walk you through all the necessary steps you’ll need to know as a foreign brand about selling to China and we’ll begin with a brief history of Cross-Border Ecommerce in China.
History of Cross-Border Ecommerce in China From 1.0 to 3.0, 20 Years in the Making
1.0 (1998-2007), The Rise of Oversea Buyers
1998 As early as 1998 a selective few…