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Nowadays, you will find there are growing numbers of Chinese sellers on online shopping websites like eBay and Amazon, and most of their product prices are extremely low because they are directly sold from China to the final customers. Local sellers on eBay or Amazon start to worry about will these people take away their business.
Indeed, if a foreign customer wanted some product manufactured in China, it used to be done through a long route. Product manufactured in a factory was passed on to Chinese trading companies, to the foreign trading companies to local wholesalers in foreign countries, and finally to the customers. At every transaction, profits are earned, making the final product extremely expensive for the customers.
It is a business that eliminates all the above-mentioned transactions. The Chinese suppliers buy products from the local factories and markets and sell them on the e-commerce website platform. The products ordered by foreign customers are sent directly through international express (FedEx, DHL, UPS) or postal parcels. The process helps in doing away with the profits earned at different levels by trading companies; wholesalers, particularly by foreign retailers during traditional trade. This method reduces the price of purchased products to such as extent that you can buy an iPhone USB cable just for $1, with free shipping to the United States.
Presently the cross-border e-commerce suppliers from China gather on three website platforms namely eBay, Amazon, and Aliexpress. Besides these, a few new website platforms like the Wish are also gaining popularity among Chinese suppliers. Besides these websites, many cross-border e-commerce companies also have their own B2C websites for carrying out B2C cross border business e.g. lightinthebox.com (NYSE：LITB) and DealExtreme.Com. For regions where language is a barrier and people speak a single language such as Spanish, Portuguese, Russian, Arabic, the Chinese trading companies have developed online shopping websites that specialize in that particular language.
The companies owned by these Chinese suppliers vary in size from large size to very small size. Large-sized companies have staff sizes of 200 -500 members, own manufacturing plants and warehouses in different countries. Companies that are miniature in size can be very small with just 1 or 2 people working from home and stacking their products in their bedrooms or living room.
Earlier, just a few Chinese sellers were registered on eBay for carrying out cross-border e-commerce. The primary cause behind these few numbers was the fairly high fees charged by the International small package express. But, since 2010 an increasing number of Chinese sellers began selling electronic products and jewelry products on eBay. These products are quite cheap and suitable for air transportation, thus bringing a lot of competitive pressure to foreign counterparts. Now most suppliers of these products on eBay are Chinese giving tough fights to suppliers from other parts of the world.
In the year 2014, Amazon opened the “global shop” project to Chinese sellers who wished to do online business. The criteria for selecting these sellers depend upon their website brand and logistics network. This will surely help consumers all over the world, to purchase products directly from China easily and deliver them safely to their desired destination.
We can explain the escalating growth of Aliexpress in the year 2015 with the following chart. Aliexpress is the cross-border B2C platform of Alibaba that gathered momentum and currently has the maximum number of retail suppliers from China. The chart shows that the search volume of Aliexpress is 6.7 times that of Alibaba, which itself is one of the most popular B2B platforms in the world.
Presently, China has about 20,000 small trading companies and approximately 60,000 people engaged in cross-border e-commerce. For instance, Guangdong has emerged as the largest province engaged in international trading of products through cross-border e-commerce. This region alone accounts for about 70% of the entire trading volume from China.
According to a report, every day about 150,000 express packages are being dispatched to foreign countries from Guangdong. These numbers are still growing with more and more people joining this business. In cities like Shenzhen, Shanghai, Guangdong, and Yiwu you can even find a cross-border e-commerce training school. These schools provide training in sales and marketing of products through cross-border e-commerce. Numerous online forums are also available for sharing your experience and learning from other people’s knowledge and experiences.
It is extremely easy to start with cross-border e-commerce businesses and earn profits. If you are still a university-level student and desire to earn some money in your free time, you can do this through B2B cross-border e-commerce. For instance, if you choose to sell an iPhone case, all you need to do is, register an account on Aliexpress. Pay just $0.8 for buying the case from the local supplier, pay $1.6 as the postal fee to the US, and sell the product at $5 to your customer. In this way, you will earn a profit of $2.6 on every iPhone case sold to these customers. If you can sell just 30 cases in a week, you will be able to earn about $78 per week, a sufficient amount as your pocket money.
The increasing growth of China’s cross-border e-commerce seems to be posing a threat to people engaged in selling Chinese products to different countries of the world. But, retailers and wholesalers need not worry about the existence and success of their businesses for the following reasons.
1. Cross-border e-commerce businesses are suitable for products with small volume or weight and are high in value. These include products like jewelry and electronic products where international shipping fee is very low. For most products that are large in size and are heavy, the fees charged by International express are quite high, thus making the product very expensive.
2. For example, 1.1kg gymnastic ball when shipped from China to the United States costs $ 20- $ 25 international express fee. Whereas the same product costs $20 if purchased from the US itself, quite reasonable when compared to the former purchase.
3. For China-based cross-border e-commerce websites, it is not easy to return and refund the products that have been sold, because buyers need to pay the expensive international express fees. Amazon is the only website, which easily accepts returns and refunds money for the returned products. This is due to the fact that Amazon manages its own facilities for storage and delivery of products, and has very strict rules for sellers.
4. Shipping products from China to any other country takes about 7-15 days, a very long time. Most customers prefer to buy products at higher prices from local stores, where they don’t need to wait so long.
5. The market share of cross-border e-commerce business is still quite low. Logistics, payment process, and return of products, all are at a very nascent and immature stage. It will take a long time to develop the processes and systems required for cross-border transactions to function efficiently.
The problem is similar to another traditional issue i.e. “will eCommerce replace traditional stores?” In reality, E-commerce did not replace retail stores in totality. Just a few products like electronics and books were able to occupy a large share of the traditional retail market. Although online shopping is gaining popularity among people, customer buying behavior particularly for clothes reveals that people still prefer local markets and streets for buying clothes.