How to Sell
Navigating E-Commerce Sales in China: Tips and Regulations
China's e-commerce landscape stands as one of the most expansive and rapidly evolving markets worldwide. With booming cross-border e-commerce activities, both domestic and international merchants are increasingly focusing on the Chinese consumer base. Understanding the nuances of this vast digital marketplace is essential for businesses aiming to thrive in selling to Chinese consumers.
The Scale of China's E-Commerce Market
China's e-commerce market is unparalleled in scale. In 2021, cross-border e-commerce (CBEC) imports and exports reached an impressive RMB 1.98 trillion (approximately US$277.3 billion), marking a 15 percent year-on-year growth. This trend highlights China's central role in global e-commerce and the growing appetite for international products among Chinese consumers.
The government has established 132 cross-border e-commerce pilot zones to facilitate and regulate these transactions. These zones serve as hubs for innovation and development, ensuring a streamlined process for imports and exports. Such initiatives have made it easier for foreign businesses to access the Chinese market without necessarily having a physical presence in the country.
Understanding Chinese Consumer Behavior
Successful e-commerce sales in China require a deep understanding of Chinese consumer preferences and shopping habits. Chinese consumers often prefer purchasing imported goods through mobile applications. Platforms such as TMall Global, Kaola, JD Worldwide, Ymatou, and Amazon Global are among the most popular choices, offering a wide range of products from cosmetics to electronics.
Utilizing social media and influencer marketing can significantly boost sales. Chinese consumers are heavily influenced by social media trends, and leveraging platforms like WeChat and Weibo can enhance brand visibility. Collaborating with influencers who resonate with the target demographic can further amplify this effect, driving more traffic to e-commerce platforms.
Regulatory Landscape and Compliance
Navigating the regulatory landscape is crucial for businesses looking to sell products in China through e-commerce platforms. While it's possible to sell without establishing a legal entity within China by using international platforms like TMall Global, Amazon Global, and JD Worldwide, certain compliance measures must be adhered to. These platforms often require business registration from another country and detailed information about the company and its products.
For merchants aiming to launch on domestic Chinese e-commerce platforms, setting up a legal entity in China is necessary. Foreign merchants must entrust a local company to handle industrial and commercial registration. Additionally, the Cross-Border E-Commerce Retail Import Commodities List (CBEC Whitelist) outlines the products permissible for import, comprising 1,476 items as of its last update in 2022.
Merchants must also navigate other regulations concerning product safety, including measures for the safety administration of imported and exported food, and restrictions on certain chemicals. A specific list of 75 products, including some cosmetics and pesticides, is banned from import due to harmful components like mercury.
Strategic Approaches to Selling in China
Setting up a storefront on international e-commerce platforms is an effective way to reach Chinese consumers directly. Platforms like TMall Global, JD Worldwide, and Kaola offer wholesale or supplier services, facilitating the entry of overseas merchants into the Chinese market. To establish a presence on TMall Global, for instance, businesses must submit an application to verify eligibility and pay a security deposit of US$25,000, along with an annual fee ranging from US$5,000 to US$10,000, depending on the product category.
Two primary methods exist for shipping products via CBEC to China: direct shipping and utilizing bonded warehouses. Direct shipping involves handling import licenses and customs clearance, whereas the bonded warehouse route bypasses these requirements, streamlining the process significantly.
Engaging in CBEC offers several advantages, including minimal administrative requirements and a quick launch process. Single transactions below RMB 5,000 or annual transactions under RMB 26,000 are exempt from import tariffs and enjoy a 30 percent VAT reduction. However, these benefits are limited to smaller transactions, and larger merchants must navigate different tax implications.
Finally, e-commerce platforms facilitate transactions by allowing sellers to receive payments in their preferred currency while customers pay in RMB. However, they require substantial security deposits to mitigate the risk of hosting foreign entity products. Not all products qualify for CBEC sales, restricted to those listed on the CBEC Whitelist.