The Chinese e-commerce market is the largest in the
world with a value of around USD1.5 trillion in 2019, accounting for approximately 55% of the global e-commerce
market value, and larger than the value of the US e-commerce market by two
times. As the economy grows and purchasing power rises, Chinese consumers,
especially those living in Tier 1 cities such as Beijing, Shanghai, Guangzhou,
Shenzhen, etc., desire better quality of life, making imported products more satisfying
and desirable. Cross-border e-commerce (CBEC) has become a trading channel with
high growth potential in China, with the average compound annual growth rate (CAGR)
from 2017 to 2020 reaching as high as 35-40%, which is higher than that of the
total domestic e-commerce market at 20-25% and that of total retail market
value at 7-8%. On January 1, 2020, the Chinese government relaxed their conditions/regulations
on cross-border e-commerce businesses. One of these changes expanded the limit
for Chinese consumers to purchase goods through cross-border e-commerce
platforms from RMB20,000 per person per year to no more than RMB26,000. In
addition, the reduction of tariffs on imported goods to a level lower than
normal trade tariffs has led to a continuous increase in the number of Chinese consumers
who buy goods through cross-border e-commerce platforms, known as the “Haitao”
group, the total number of which is expected to reach 300 million in 2021.
In the context of the growing trend of
China's cross-border e-commerce, operators in many countries, including
Thailand, hope to tap this market. KResearch believes that although China's
cross-border e-commerce market has great growth potential, it is not easy for
Thai operators to enter this market. Therefore, Thai operators interested in
expanding into the Chinese market through this platform need to conduct market
research and consider cost-effectiveness or profitability thoroughly, while main
challenge factors to be considered include:
1. Operators will face fierce
competition, especially from Japanese and Korean products. Among all Chinese
consumers who buy goods through cross-border e-commerce platforms, more than
72% and 60% of them prefer Japanese and Korean goods, respectively, while less
than 2% of them buy Thai goods, most of which are goods with low unit prices,
including snacks, cosmetics, health products (such as latex pillows, herbal inhalers), etc.
2. The initial cost of conducting
business on cross-border e-commerce platforms is very high, including security deposits,
annual fees, and commission (2%-10%, depending on the product type), totaling anywhere
between THB500,000 to THB1 million, depending on the terms and conditions of
each platform. On top of this, additional marketing expenses may be required in
order to increase brand awareness.
3. The economic status and purchasing
power of Chinese consumers. Although China's economy has recovered well due to
effective COVID-19 prevention and control measures, it is still necessary to
closely monitor the global COVID-19 situation which may affect the Chinese
economy and the purchasing power of Chinese consumers, who are expected to
spend cautiously, especially for non-essential goods.
KResearch Center views that Thai
operators can still find opportunities to enter the Chinese cross-border
e-commerce market. By comparison, products from major competitors such as Japan
and South Korea bought by Chinese consumers are largely the same as those sold
by Thailand (such as cosmetics, skin care products, personal products, and
health care products), and their prices are not very high due to restrictions
on the amount (not more than RMB5,000) of each purchase allowed and the total
annual purchase amount permitted (not more than RMB26,000) through e-commerce platforms. However, the
main reason why Chinese consumers buy more Japanese and Korean products than those
of Thailand is that Japanese and Korean sellers pay attention to product
quality and after-sales service, and their reputation is quite good. In fact,
Thai products also have the advantage of high quality and are increasingly
becoming recognized by Chinese consumers. Therefore, it is necessary to further
increase awareness and highlight the selling points of authentic high-quality
Thai products and to improve Thai competitiveness by focusing on creating
product origins or stories. To make brands well-known, modern packaging designs
can be used to create selling points to meet the needs of Chinese consumers in
pursuit of fashion and a better quality of life. If Thai operators can make
adjustments in above aspects, there will be room for growth in total quantity
and amount of Thai goods sold in the cross-border e-commerce market, and the
share of Thai goods bought by Chinese consumers through cross-border e-commerce
platforms will also increase accordingly.
When carrying out marketing activities in China, Thai operators must be
very cautious, particularly to register trademarks before starting marketing
campaigns to protect the rights of Thai brand owners, and to select marketing
channels that suit their marketing budget and target groups. The target groups
worthy of attention are not only in Tier 1 cities, but also those living in new
Tier 1 cities, as they also desire a better quality of life and view foreign
products of good quality and high safety in the same way as consumers living in
Tier 1 cities do. Therefore, it is expected that the demand for imported
products through cross-border e-commerce platforms in cities such as Chengdu,
Hangzhou, Chongqing will increase.
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