Pivot Point Global
E-Commerce
The E-commerce Explosion in China
China’s e-commerce market is the largest in the world. While China accounted for less than 1% of the value of worldwide e-commerce transactions 10 years ago, it now occupies more than 40%, according to a report by McKinsey. As illustrated in the graphs below, China's e-commerce market is booming.
Of particular relevance to global companies, China's cross-border e-commerce market mirrors this growth. In 2021, according to statistics from the General Administration of Customs in China, cross-border e-commerce imports and exports reached a total of US$277.3 billion USD, an annual growth rate of 15%. In the first half of 2022, this figure was 28.6%. All this comports with the fact that trade between the U.S. and China is stronger than ever, reaching a new record in 2022.
While 10 years ago, it was a burdensome process to reach China's consumer market, that is no longer the case. China's largest and most influential cross-border e-commerce platforms, Tmall, Jingdong, and Kaola now offer straightforward and accessible pathways for foreign companies to reach Chinese customers. Popular product categories include:
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Beauty
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Consumer electronics
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Cosmetics
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Fashion
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Food & Beverage
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Health
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Home
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Jewelry
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Mother and babycare
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Personal care
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Pet products
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Sportswear
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Sporting goods
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Toys
The list of 1,476 products allowed by the Chinese government to be imported to China can be viewed here in English. Few products are prohibited from being imported into China. Such products are dangerous (e.g., explosives), illegal (e.g., counterfeit currencies), unhealthy (e.g., medicines from disease stricken areas), or related to national security.
Companies exporting to China may wish to expand their operations and invest further in the country. China maintains 3 negative lists that restrict or prohibit foreign investment.
(1) Negative List for Market Access, applicable to foreign and Chinese companies (Chinese);
(2) Special Administrative Measures Negative List for Foreign Investment Access (English);
(3) Special Administrative Measures for Foreign Investment Access in Free Trade Pilot Zones (English).
Top E-Commerce Platforms in China
As of January, 2020, Tmall was the 3rd most visited website in the world. As of March 31, 2022, it was the largest 3rd-party e-commerce platform in the world in terms of Gross Merchandise Value (GMV). Users spent more than twice as much time on Tmall than its closest competitor JD.com
Tmall's approach is driven by providing Chinese consumers with top-quality branded products. It possesses over 500 million registered users, 50,000 merchants, and represents over 50% of the country’s e-commerce business.
Security deposit: $25,000 USD
Annual fee: $5,000 - $10,000 USD
Commission: 2% to 6%
JD.com, Inc. (aka, Jingdong) is the 7th largest tech company in the world and a member of the Fortune 500. It has approximately 580 million annual active customers and held a 24% share of the e-commerce market (GMV) in China as of 2020.
Security deposit: $15,000 USD
Annual fee: $1,000 USD
Commission: 2% to 8%
Although Kaola is smaller than Tmall or JD.com, it specializes in providing high-quality branded products from overseas retailers. Strictly in terms of cross-border e-commerce, Kaola's platform held a market share of 27% in China in 2019. It focuses on higher end niche items that differ from its competitors. Its unique subscription-based model provides a more personalized shopping experience to its upper and middle class customers.
Deposit: $10,000 USD - $15,000 USD
Annual fee: $1,000 USD
Commission: 2% to 10%