• Ker Zheng

Three Tips for Retailers Looking to Sell in China in 2019

This year, regulatory changes will have a major impact on the way cross-border retailers sell to China. And yet, ever-evolving sales and marketing channels in China may also create new opportunities for those looking to crack the market for the first time.

As we kick off the new year, here’s three major tips you should keep in mind.

1. Stay on top of cross-border regulatory changes

In recent months the Chinese government have issued a slew of new regulations, changing up the game for both daigou sellers and those selling through cross-border e-commerce.

For one, China’s new comprehensive e-commerce law (effective January 1st, 2019) cracks down on gray-market daigou sellers by forcing them to register as businesses and file tax returns. If you’re a retailer that relies heavily on daigou for your revenues, then you should consider alternatives because this market is likely to shrink in 2019.

Chinese premier Li Keqiang announces regulatory changes at State Council meeting in November 2018. Source: CCTV

China is also expanding the scope for cross-border e-commerce because this channel can be better tracked and taxed, when compared to gray-market daigou purchases. It also makes it easier for the government to regulate and protect consumers from fake/shoddy goods, since they’re purchasing directly from overseas brands and retailers.

In November, the government raised limits on CBEC purchases from 2,000 RMB/transaction and 20,000 RMB/year to 5,000 RMB and 26,000 RMB, respectively. The government also lowered import duties on inbound postal shipments. Postal duties for the top two tax brackets were reduced from 30% and 60% to 25% and 50%, respectively. Read more about this update here.

2. Be mindful of the changing environment on large e-commerce platforms such as Tmall and JD.com

In 2018, quite a few retailers announced the closing of their Tmall stores, with some opting to exit the China market altogether. US department store chain Macy’s, British apparel retailer New Look, and Hong Kong health & beauty chain Watson’s are the latest players to announce their departures from Tmall, likely due to lackluster Singles Day sales and high commission fees.

This is partly because large platforms such as Tmall, JD.com, and Netease Kaola are increasingly procuring inventory in bulk, directly from brands and at reduced prices. This makes it difficult for multi-brand retailers on their platforms to compete since they oftentimes sell the same popular brands and it’s very easy for customers to compare prices online.

Big companies such as Tmall also benefit from economies of scale and can stock inventory in bonded warehouses in China, where they can be shipped out at a moment’s notice and arrive at their destinations within just a few days. An overseas retailer such as Macy’s in the US can take as long as 20 days to ship their orders to customers in China.

Retailers should think long and hard about how they can differentiate themselves, and whether or not their products are compelling enough for customers to wait for cross-border shipping.

3. WeChat mini-stores may be the key to unlocking e-commerce sales for smaller brands and retailers

Big brands such as Dior, Innisfree, and Lancome are launching innovative marketing campaigns on WeChat to drive traffic and sales to their mini-program stores. Cosmetics tutorials, livestreaming influencers, and interactive games are just some of the features that are being built into mini-programs to increase e-commerce conversion rates.

Gucci’s WeChat mini-program enables users to send perfume bottles as gifts to friends. Source: Gucci WeChat mini-program

WeChat now makes it feasible for brands to both push content and sell products at the same time, creating a closed loop of customer interactions that can be completed within the WeChat ecosystem. Mini-program stores are more visual and accessible, given their 10-megabyte size limit, making it easy for customers to share engaging promotions with one another.

Given WeChat’s large user base, mini-program stores may give a fighting chance to smaller brands who cannot get on larger marketplaces or don’t want to pay their high fees. Emerging US baby lotion brand Ever Eden and UK cosmetics retailer Feelunique are also some of the first to launch cross-border WeChat mini-program stores, which are equipped with cross-border payment solutions and logistics tracking features for goods shipped from overseas.

To read more about our tips for China retailing and e-commerce in 2019, click here.

About Azoya

Azoya is a global e-tailing group that sets up and operates e-commerce businesses for international companies in China. Based in Shenzhen, its staff of nearly 300 employees is dedicated to carrying out day-to-day operations, which include merchandising, marketing, logistics, payments, customer service, and more.

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