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The Ultimate Guide to Cross-Border Ecommerce in China: How to Choose Right Platform for Your Business

In a previous post, we’ve briefly talked about cross-border eCommerce in China in terms of its history and its current scale. If you haven’t read it, we highly recommend read that article first: The Ultimate Guide to Cross-Border E-commerce in China: History and Scale.
In this article, we’re going to continue exploring the idea of cross-border eCommerce and talk give you an overview of the complete ecosystem as well as show you which platform model is the best for your business to sell cross-border into China.

An Overview of the Ecosystem

Before we talk about the nitty gritty of choosing the right cross-border e-commerce platform for your business to sell to China, let me first give you a complete overview of the current Ecosystem
Most people grossly underestimated the extent of the Chinese cross-border e-commerce ecosystem. It is actually highly integrated and roughly divided into 3 sections with multiple subsections.
On the very top level you the very fabric of any e-commerce ecosystem which consists of Suppliers, Platforms, and Support but of course we can really divide the 3-main section into the following sub-sections.
  • Suppliers: Retailers, Brands
  • Platforms: Independent, Dependent, Hybrid
  • support: shopping tool, payment gateway, logistics, bonded warehouse,
Now if we would to divide this one step further, it would look something like this:

As you can see there is really a lot to talk about here. China’s full cross-border e-commerce ecosystem is really quite deep and integrated. I’m going, to talk about each specific section in more detail but let us first examine two popular models.
Platform » Hybrid » Bonded Warehouse + Direct Shipping
Let’s suppose you want to you want to sell directly to China, and you’re going to use a hybrid platform to list your products you can then use either a bonded warehouse which will allow you to pre-ship your products in bulk to either a managed by the government or private entities such as Alibaba for storage.
Alternatively, you can also just do direct shipping meaning you as a merchant will ship directly to the customer upon their order regardless of where you’re selling the product from in the world. And of course, you in this category you can really use a mixture of the two solutions to get your product to the customer's hand in China.
Support » Shopping Tool » Rebate, Price Match, Advisor
On the other hand, if a Chinese consumer is looking to find your products from within China there are already many Shopping Tool setup to help them make a better purchasing decision. For example, there are many advisory platforms like “TripAdvisor” that will help Chinese consumers find the best cross-border platform to purchase the product that they want.
To give you a better idea below is a diagram for each section mentioned above:
A) Supply
B) Bonded Warehouses
C) Payment Gateway
D) Platforms - Direct Mail+Bonded Warehouse
E) Platforms - Direct Shipping
F) Platforms - Bonded Warehouse
G) Purchasing Tools
H) Logistics

The 3 Platform Model and Which is Right for Your Business.

The very first thing you’ve to do if you want to sell cross-border to China is to really select a platform model. As we have already mentioned above there are really only 3 platform models that you can use to sell cross-border to China.
Independent Model, B2C (自营平台)
An independent eCommerce platform is really just an online retailer. Amazon was one of the earliest independent cross-border eCommerce platforms in the world. They’ve now shifted to a more hybrid platform which I will explain a little later but they originally started out by selling books directly to consumers.
Nowadays, with many eCommerce supporting platforms such as Shopify, Big Commerce, Woo Commerce, and Magento. There are literally hundreds of thousands of independent e-commerce store selling everything from rubber balls to designed stickers.
In China, however smaller independent on independent eCommerce stores are rare. Most independent cross-border seller in China are big brands such as TMall, JD, and VIP.com. This is largely due to the fierce competition and the aftermath of price wars.
Survivors of wars such as VIP.com(唯品会) are going to be either well-funded or they’re going to be subsidiaries of giants such as JD or TMall. So, if you’re thinking of selling cross-border to China using WeChat store or Weidian, you might really want to consider the amount of risk that is involved.
Pros
  • Since you own your own platform you don’t have to pay any merchant fees.
  • You have full control over your supply chain, logistics, storage, and customer services.
  • Since you control the full platform, you can brand your business or product and gain long-term customer loyalty.
Cons
  • For most independent eCommerce platform for China. The biggest challenge is that you’ll have limited money, resources, and even connections.
  • Since you literally own and operated everything from platform to inventory with this model you will also carry all the risk of inventory waste.
  • Difficult to make a profit in the early stages. You’ll need to invest highly in all aspects of your eCommerce business in the beginning with this platform model. And because of that many cross-border sellers usually lose confidence too early and give up too quickly.
What Type of Business Should Go with The Independent Model?
  • If you already have a strong brand for your product.
  • If you have solid supply chain established already.
  • You have good cash flow and are prepared for the long run.
  • Product or service that emphasizes on quality and features and not just quantity and price.
Dependent Model, C2C (平台类电商)
eBay is probably the first dependent eCommerce model in the world. The original idea of eBay to facilitate online sales from either business to a consumer or a consumer to another consumer. And the way these platforms would profit would to charge merchants
In China, the biggest and the most famous example of the dependent model would be Taobao. In fact, in order to win the war again eBay China at the time, Jack Ma said that Taobao focused more on the C2C model and eBay was more B2C. This is however just a marketing plot to distinguish Taobao from eBay at the time.
Pros
  • No development or IT headaches, it is easy and fast to set up.
  • Easy to expand the number of SKUs you sell.
  • Relatively low risk and low cost at early stage
Cons
  • Advertising cost might be high and expensive
  • Most people who sell on dependent platforms will often find them self-involved with price wars.
  • Hard to brand your store and it could be difficult to gain customer loyalties.
  • Choosing a right dependent platform that suits your need is critical. Your reputation, traffic, and even survival will be dependent on it.
  • If setup store on multiple dependent platforms in order to lower your risk and to increase traffic. Your initial investment will go up.
What Type of Business Should Go with Dependent Model?
  • If you're new to the industry or e-commerce. And you only want to test the market by opening up a quick store for a short period of time (e.g. 6-12 month).
  • You don’t have a large amount of capital to start your own store and you don’t have the ability to handle supply chain, logistics, storage, or customer services.
  • You only want to clear the inventory and have no plan to actually expand your market in China
The Hybrid Model
Finally, we have the Hybrid platform which uses a combining of independent and depends model together. This means that this platform will sell products in their inventory as well as allow other merchant or seller the opportunities to sell through their brand and platform.  And the best example of that would be the standard Amazon and Amazon for Sellers,
And you as a seller may also want to adopt a hybrid model of selling your products to China. You can list your product on a dependent platform and create your own independent platform as well.

Conclusion

By now, I hope that you would agree that China cross-border e-commerce is a sophisticated and emerging opportunity for any foreign businesses who wish to sell their products directly to China. And that you’ve got a better idea on which platform model will work for you. There is no the right way or the perfect way for any particular business. It really comes down to your goal, your current resources, and your overall plan.

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