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What Is the Current Situation of Cross-border E-commerce? What Transformation Opportunities Are There? Where Will the Post-e-commerce Era Take Cross-border e-commerce?
Xu Lele-Shanghai-yMato Procurement and Sales @ wechat: x1395711770
Former channel manager of New Zealand Countdown supermarket office in China. Former procurement Manager of B2B Global Procurement Division of yMato.
The Internet has deepened the globalization of shopping. With the continuous advancement of technology, the once-popular cross-border e-commerce environment has changed a lot. What kind of different cross-border new e-commerce will the 5G era bring?
The major experience that e-commerce brings to us is the shopping experience that breaks down time and space. We also collectively refer to these global e-commerce platforms as cross-border e-commerce. Cross-border e-commerce is generally a type of e-commerce, but it is different from general trade. General trade belongs to import trade, which is usually a business behavior between enterprises, while cross-border e-commerce is usually directly facing consumers worldwide. In addition, they are different in many aspects such as taxation system, supervision method, import link, transaction method, and business model.
Overview and Models of Cross-border E-commerce Platform
Currently, the platforms we know, such as Koala, Tmall, Amazon, eBay, and Wish all have cross-border businesses. These are actually domestic import and export platforms. Are there any differences in their platform models?
Koala, Tmall and Amazon are all more familiar and commonly used cross-border e-commerce platforms, so I won’t go into details here. eBay and Wish, which are still relatively niche in China, are mainly e-commerce platforms used abroad. What is the difference between the two?
eBay is the largest online merchandise trading platform in the USA, allowing people around the world to purchase, sell and auction items on this platform. Compared with Wish, eBay mainly targets the European and North American markets. The model is similar to that of Taobao in China, with complete categories and low barriers to listing. Wish is an emerging APP-based cross-border e-commerce platform. In recent years, it has quickly attracted consumers in foreign markets. Its core categories are mainly apparel, mobile phones and gifts. Before the establishment of its cross-border e-commerce platform, Wish was just a tool for managing products. It mainly focused on sub-categories of products, recommending some products according to customer preferences and promoting by content sharing. Its products are mainly shipped from China, and most sellers are Chinese. Its product features are low unit price, low weight, high gross profit, good quality and low price, and the main market is the North American mobile endl.
These cross-border e-commerce platforms are usually divided into different models like B2B, B2C, and C2C. I used to do deal with B2B at yMato, which is a C2C platform.
B2B (Business-to-Business) refers to the fact that both the supply and demand sides of the e-commerce transaction are merchants (or enterprises and companies). The B2B model is similar to traditional general trade, which is simply a pallet for large orders. Its representative is Alibaba.
B2C (Business-to-Customer) refers to the model where the supplier is the merchant and the demand side is the consumer. It is an online shopping channel provided by most companies for consumers through the Internet, and it is able to sell products to consumers directly online. Its representative platforms include Amazon and JD.
C2C (Customer to Customer)— individuals to individuals. Now there are some platforms for individuals to sell products to other individuals. This platform mainly relies on the current logistics industry. The biggest advantages are low inventory, low capital, and low thresholds, such as small- scale Taobao shops, but the more representative platform is actually eBay and yMato. yMato is aimed at smaller individuals overseas. For example, if you are an international student or a salesperson of an overseas supermarket, you can put the product on the yMato and sell it to Chinese consumers through the platform. The well-known purchasing agents, who directly ship products to domestic consumers, also belong to this mode. If there is a platform in the middle that can connect both sides, it is in C2C mode. These are different modes of e-commerce, but the fact that docking ports of various modes are different determines their own characteristics.
Under the Premise of Increasingly Intense Competition, What Kind of Directions for Transformation are There for Cross-border E-commerce?
In fact, currently, the threshold for cross-border industries is getting increasingly high, and platform traffic is slowly falling. Judging from the current status of cross-border e-commerce in China, manufacturers who really profit are overseas brands. Relying on their own brand advantages and channel advantages, brand owners directly authorize China’s supply chain or TP (Tmall Partner) agents. TP is the acting operator. The relatively powerful brands have offices in China and are responsible for procurement themselves. In a certain way, the distributor refers to the supply chain company that helps a brand sell, mainly focusing on trade attributes. Nowadays, cross-border distribution is becoming more and more difficult–The price limit of brands, the control of channels, the instability of the market, etc., have all restricted the dealer’s authority. Most of the dealers currently based on B2B and B2C models have fixed sources of supply and channels. The C2C dealers, on the other hand, are scattered and the individual volume is relatively small.
From 2015 till now, cross-border imports have gradually become the Red Sea. The cross-border imports that everyone knows are no longer what they usually are, and many people are thinking about ways of transformation! Take Danone as an example—it has several types of the most popular milk powder. In the early years, the traders who cooperated with Danone were mainly B2B, wholesaling to Hong Kong customers directly. Now Danone directly authorizes to several major customers for sale, such as U1Baby Online，as well as Kidswin and Yuou Offline. This way of making their own supply chain system based on their advantages is called “clutch chain” in the industry.
The reason why cross-border e-commerce began to think about transformation is that after the dividend period of previous years, the current development of e-commerce has also begun to face unavoidable development bottlenecks. What is their dilemma? Should they choose platform or positioning? In fact, whether it is platform or positioning depends on the capabilities of all parties. When the development of cross-border import trade enters its second half, it is time to start to competition of the overall strength of the supply chain. For small cross-border importing businesses, when they entered the industry, the fact that the price was not so transparent, and the market competition was not so fierce neither made it easier to achieve profitability. But now, while the path for import are becoming clearer and the prices are increasingly transparent, the market is still dominated by the first and second tiers– the speed of sinking to the third and fourth tiers is very slow, making the share of the cake smaller.
Which direction should cross-border import and export businesses go? How to do cross-border business well? This has to go back to 2015, when import trade was still a blue ocean–platforms such as Koala had not yet emerged, and various national trade policies of the country were slowly being liberalized, without formulated policies. Identifying the prospect, many companies earned their first bucket of gold by adjusting from general traders to cross-border imports. China’s cross-border exports also started in 2015, when Shenzhen’s major sellers were also confused and did not know what to do. But at that time, many small business owners who were engaged in exporting thought that they saw the opportunity. Although they wanted to try it, there were no overseas channels. At that time, many cross-border forums appeared in Shenzhen, and many companies would pay a fortune hiring talents majoring in international trade.
Koala and Amazon have done well for some time. But now it seems that cross-border e-commerce and foreign trade are starting to experience difficulties, such as increasing tariffs. Even for the industry giant Amazon, it is not easy: VAT has to be paid in Europe, and the competition in North American is getting increasingly fierce. There are still prospects for development in the Canadian market, but currently more platforms have started taking the route of boutique. The requirements for products are also getting higher. In order to gain unique advantages, it is best to be serialized and systematic. Currently, among these platforms, Amazon is still more suitable for merchants with production systems to take boutique routes. In addition, there are also many merchants who build their own websites without relying on third-party platforms—they have the conditions for transformation.
Compared with domestic e-commerce, cross-border e-commerce has its advantages in terms of transformation, since it does not draw distinguish in geography.
If you are a factory with your own set of production system, all you need to do to get onto Amazon is improve the product quality, move closer and upgrade towards the product lines that are systematized with boutique route. If you are a trader who wants to do business on Amazon, it is recommended to deal in products in small categories, low unit prices, low weight, and high demand—Market is relatively large for this type of market. In 2015, when cross-border exports were surging, many people realize that this is the market trend and they wanted to be involved. There were also Many people desperate to do it, creating a lot of accounts in advance to occupy the “pits”; now they refined them slowly, gaining a lot of profit. Although this method can occupy a certain market share in the early stage, the current difficulty lies in its heavy inventory pressure. In addition, with the popularization of real-name system, this method of creating multiple accounts in a large volume is no longer feasible.
What are the other ways of transformation? It used to be the development from offline to online, and now, there are online platforms that transform to set offline experience stores. For example, Shopify’s self-built station has started offline foreign trade. In addition, there are also those who make tens of millions a year through sales systems, such as Woocommerce. Woocommerce is a self-built mall system, which is mostly used by foreign trade customers. Just by selling this mall system to companies that do foreign trade, it can earn ten million a year. The number of customers in this field may be greater than we imagine. For independent e-commerce websites, they have also realized that they need their own living space, that is, self-built websites. The self-built websites used by the back end mainly include Shopify, Woocommerce, and so on.
Developing subdivision categories is also a direction for transformation. Everyone used to like wide track and high gross profit. Now, whether it is import or export, many categories are developing well. They may not be large categories, but they can achieve Top Sales in small categories. However, foreign e-commerce models are still different from domestic ones—they are not like China, where Taobao is such a huge platform and such a large market. The services provided by Taobao platforms, especially secured transactions, have Chinese characteristics. A great source of traffic for foreign shopping searches is Google, but there are many websites with vertical category segmentation abroad, for example, there are shopping websites that deal in clothes and shoes respectively. Integrated and unified platforms also exist, such as Amazon, eBay, but neither of these sites has achieved such a large market position as Taobao, whose slogan is that Taobao is omnipotent. It seems that no website abroad dares to claim that credit, but the mindset of domestic e-commerce is not enough for foreign trade, due to the differences in environment and background. Since credit is important abroad, the credit system is relatively complete and fixed. Purchases on eBay is paid through PayPal–because they are already used to it, they think it is very simple, therefore, there will not be revolution in payment methods in spite of Alipay in China. Refund is also available any time in the United States. People with real names in the United States can only have one account, which is different from China, where you can often have multiple accounts. In the United States, when eBay and Amazon find something in your shopping cart or products you browsed, they will basically notify you the price and latest situation of the products or similar ones every 1-2 days. As a seller, the system will also tell you who is interested in your products after viewing them, and that if you lower the price a bit, maybe you can close the deal. However, with the popularity of big data, Taobao is currently able to promote products, remind and notify users based on their preferences.
The platform behavior of combining big data analysis, intelligently promoting users with their interests combined with text, pictures, videos and other content so that you see what you are interested in, and the website where you bought products promoting related products reminds us that we are moving towards the “post-e-commerce” era, and the more mature post-e-commerce era may develop towards contextualized one-stop shopping. Now Taobao has begun to set up personal avatars, which may be the first step towards an immersive user experience in the future. While it used to be E-commerce, it could be A-commerce in the future. AR and virtual shopping experience can solve many existing difficulties including inaccurate fitting sizes, which is also a subversion to the past and entrance to intelligent shopping. If this model can be implemented on games, then it will be fine on shopping. Viewing it from now, it may be realized soon.
With the advancement of technology, advertisers and media will use technology to make shopping products more diverse and attractive. In addition, the 5G era has brought us more chances and opportunities, so various applications can promote contextualized shopping. Future shopping may be like imitation of an entity. Building an entity on a large platform, for example, putting well-known architectures around the world on the platform and consumers go directly to shops, watch movies and play games in the headsets– mature packages of this already exist in cross-border e-commerce. The Shopify mentioned above is just an example of combining AR and VR.
What can the technological revolution bring us? We tend to be unable to see the whole picture in the flow of history. With the development of technology, the “contextualized one-stop shopping” of e-commerce may be achieved in the near future, and online shopping can be as real as in a physical entertainment street. Physical stores also need to consider making new retail experiences, deeply cultivating artisan spirit, creating personalized experiences or “anti-tech” experiences. In the future, when we achieve material abundance and it reach a certain saturation, what the market needs may not only be products, but service consumption that pays more attention to spiritual level.
If “contextualized one-stop shopping” can be achieved, what e-commerce sells is no longer only the past products itself, but more likely, it will focus on the service consumption before the rise of e-commerce. Currently, the mode of cross-border import and export is basically fixed. It is nothing more than B2B, B2C, and C2C. The direction of future development will definitely be scientific, experiential and intelligent. For us, there are opportunities as long as we make decisions based on the actual situation of our company. E-commerce is a platform and a way of selling. We need to look at its role in a rational way. More essentially, we should seize the development trend and take the foothold of product core.