Shanghai Skyline

An Introduction to Chinese Cross-Border eCommerce: Part 1

Why China?

We all know that China is the world's most populous nation with the largest GDP of any nation and cultural roots dating back millennia. For the past 40 years, China's economy has remained one of the fastest-growing in the world and shows no sign of slowing down: as of last month, China's CCI is on track to reach a 10-year high1. In 2016, China's online retail sales reached US$752BN, with US$79BN driven by cross-border ecommerce sales—that is, ecommerce sales of products outside of China—and last year confirmed the same trend: cross-border ecommerce sales grew by 81% Y/Y with imports, specifically, skyrocketing by 116%.

The data is clear: China is engaging with the internet in a big way. Of today’s top 20 internet leaders, nine are in China (up from just two five years ago ) and China boasts the largest number of internet users in a single country—and they're not just messaging and gaming. In 2017, national online sales accounted for 19.6% of total retail sales, an increase of 32% compared to 2016 .

You may be thinking, "Don't get me wrong, that's all great! …but, what does that have to do with my business?" And you're right—in and of itself, this information probably means little, so let's put it in context.

China is the largest ecommerce market in the world, leading the future of ecommerce and mobile retail. Growth is driven by the penetration of mobile devices, the dominance of digital payment, constant innovations in social media, guerilla, and viral marketing, close engagement of internet celebrities and influencers, and of course, the hot competition between ecommerce start-ups, their investors, and established retailers companies.

The top leaders and innovators within the Chinese ecommerce space, Jack Ma (Founder & CEO, Alibaba), Qiangdong Liu (Founder & CEO, JD.com) and Lei Ding (Founder & CEO,NetEase [Kaola]), are actively recruiting and advocating for global brands to enter the Chinese market by launching products on their respective platforms—and you don't have to be publicly traded to do it.

What is driving cross-border ecommerce? As China's growing middle class is increasing exposed to foreign products via online/social media engagement, Chinese consumers are increasingly focused on affordable imported goods. Chinese consumer equate international goods with overall higher quality products and a significantly lower risk of counterfeiting: 61% of Chinese consumers cited guaranteed product quality as their reason for shopping internationally .

As a result of this consistently increasing demand, foreign/imported products are difficult to find (if available at all) and ridiculously expensive in Mainland China. Accordingly, Chinese consumers are turning to online retail sites, both foreign and domestic, to source overseas products, driving cross-border ecommerce.

What is Cross-Border eCommerce?

Taking a step back, cross-border ecommerce is online, direct-to-consumer sales by a foreign retailer, supplier, or manufacturer, without the need for a Chinese intermediary. How does this differ from a traditional, general import business or relationship?

Much like the US, distributors purchase product from overseas manufacturers in bulk, function as the importer of record (responsible for all taxes, fees, and regulatory compliance) before reselling to retailers. However, Chinese general import businesses must be operated by a Chinese distributor or trade agency with a designated import permit and the overall tax value for this combines import tax, value-added tax (VAT), and consumer sales tax—totaling 30%-100% of declared value, depending on the product category. For example, the overall tax for importing wine is about 60%.

With Chinese consumers' growing demand for more, cheaper, and faster access to high-quality international brands and products, a new business model has emerged: the cross-border ecommerce B2C business. The B2C model facilitates direct-to-consumer sales for international brands and manufacturers who would otherwise be unable to establish a Chinese presence or otherwise reach Chinese consumers.


I'll give you some time to digest all of that--check back later in the month for the continuation of this series.

--Kelsey

Kelsey Ganes
Manager, Client Experience
Have a question? Please reach out to us at info@getarmr.com


Sources

  1. The Conference Board, Trading Economics/IECONOMICS Inc.
  2. CapIQ, CB Insights, Wall Street Journal, media reports. Market value data as of 5/29/18. The Wall Street Journey, Recode, TechCrunch, Reuters, and the Information articles detail the latest valuations for Ant Financial (4/18), Xiaomi (5/18), Uber (2/18), Didi Chuxing (12/17), Airbnb (3/17), Meituan-Dianping (10/17), and Toutiao (12/17).
  3. National Bureau of Statistics of China
  4. iResearch 2016/Ecommerce Foundation

Amazon Promotions: An Overview

As a customer, you may already be aware that Amazon has an incredible range of promotion types. From four-hour Lightning Deals to Subscribe & Save discounts, there are dozens of options and vehicles for offering a discount.

Before we begin, let's talk about Amazon Supported Deals. Programs like Deal of the Day and Lightning Deals enjoy the benefit of additional Amazon-sponsored merchandising across the site. These deals are automatically included in Today's Deals and category-specific deals stores and are often included in daily deals email campaigns (this is only guaranteed for Deals of the Day, sorry folks).

Restricted Promotions are deals which have a barrier to redemption: in short, customers must complete an additional action in order to receive the advertised discount. This additional action may be entering a promotional code at checkout, purchasing a certain number of units, or purchasing a specific combination of products.

Price Discount

Also known as Temporary Price Reduction (TPR)

Deal Duration: Up to 30 days.
Lead Time: Seller Central: Less than 24 hours (promotion must start tomorrow). Vendor Central: 4 weeks.
Restrictions: Minimum 5% discount off current price.

Multi-Buy Deals

Also known as BOGO, BXGY, BNXG%, BNXG%Y

Restricted Promotion: Customers must purchase a specified number or combination of products to receive the advertised discount. The key differentiating factor of multi-buy promotions is that customers must qualify for the discount by adding Qualifying Products (see below) to their cart before the discount is applied to their order at checkout.

Buy One Get What? Qualifying vs. Benefit Product Sets
The Qualifying Set is the selection of ASINs customers must purchase to qualify for the promotion. The Benefit Set is the selection of ASINs that the qualifying discount (or benefit) applies to.

Example 1:
Buy 1 or more units of Products A or B to get 50% off Product C, Products A and B are the Qualifying Product Set and Product C is the Benefit Product Set. A customer would need to purchase A or B to get 50% off their purchase of C. Sounds simple, right? If a customer buys 2 units of A, they would qualify for 50% off 2 units of C.

Most of the time, the Qualifying and Benefit product sets are the same.

Example 2:
Buy 3 or more units of Products D, E, or F and get 25% off all three units at checkout. If a customer buys any combination of 3, 4, or 5 units of either D, E, or F they would receive 25% off the first 3 products, but would not receive a discount on the 4th or 5th. If they purchase 6 units across D, E, or F, they would receive 25% off all 6 products in their cart, etc.

Discount Types

Buy X Get Y Free
Buy 1 or more Product X and get 1 Product Y free.

Buy N Get % Off
Buy specified number (N) of products in Product Set X and receive a discount at checkout. Ex: Buy 3 Apples, Get 15% Off.

Buy X Get % Off Y
Buy specified number of Products in Product Set X to receive a discount on products in Product Set Y. Ex: Buy 2 Apples, Get 50% Off an Orange.

Deal Duration: Up to 30 days.
Lead Time: Seller Central: 24 hours. Vendor Central: 4 weeks.
Restrictions: Minimum 5% discount off current price.

Discount Codes

Also known as Promotional or Claim Codes

Restricted Promotion: Customers must enter the discount code at checkout to receive the advertised discount.

Combinability: All multi-buy promotions are combinable with non-claim code promotions. Additional combinability restrictions can be added at setup.

Deal Duration: Up to 30 days.
Lead Time: Seller Central: 4 hours. Vendor Central: Minimum 2 weeks.

Group Claim Codes

Group or public discount codes can be used by anyone can redeem to receive the advertised discount. Group codes can be shared or advertised on social media and other marketing channels to drive awareness and subsequent sales.

Visibility: Group codes are displayed on product detail pages and visible to all customers.
Restrictions: Minimum 5% discount off current price.

Individual Claim Codes

Individual claim codes are just what they sound like: each claim code can only be redeemed by a single customer.

Visibility: This promotion type is not (and should not be) advertised on or off Amazon.
Restrictions: Seller Central only. Minimum 5% discount off current price. Individual codes are not published and cannot be shared; Sellers are responsible for messaging customers and delivering their individual discount codes.

Social Media Promo Code

Social media promo codes allow Sellers to offer a percentage discount. A landing page is automatically created with the list of eligible products and promotion details; the landing page exclusively features seller-specific offers, so customers do not need to locate your offer in the Buy Box. The landing page can be shared on social media or marketing channels such as paid search to direct customers and promote sales. Customers can then add items to their cart directly from the landing page and the discount will be automatically applied.

Codes default to single-use only but can be configured to allow multiple redemptions per customer account. Codes can also be configured to apply to a single product or multiple products.

Visibility: Promotion is not messaged on product detail pages.
Restrictions: Seller Central only. Minimum 15% discount off current price.

Coupons

Also known as Vendor-Powered Coupons (VPC)

Coupon discount can be setup as either percentage or dollars off. The budget you set will be utilized as customers redeem your coupon. We will deactivate your coupon when your budget is fully utilized. Targeting is available: limit availability/discoverability to a customer segment of your choice.

Restricted Promotion: Customers must clip the coupon to redeem the offer.
Deal Duration: 1-90 days.
Lead Time: Minimum 4 weeks.
Visibility: Amazon-Supported Deal. Search result badging. Available for Product Display Advertising. Targeting can be used to limit visibility.
Restrictions: Seller Central: Seller account rating must be at 3.5 stars or higher; discount must be between 5%-80% off the lowest price in the last 30 days.

Deal of the Day

Premier featured deal on Amazon. Deal cannot be inventory restricted; inventory must be available to fill all customer orders placed during deal period.

Deal Duration: 24 hours.
Lead Time: Minimum 4 weeks.
Visibility: Amazon-Supported Deal (see above). Search result badging. Available for Product Display Advertising.
Restrictions: Product must have minimum 3.5-star rating. Must be lowest price in trailing 365 days; cannot be run within 30 days following a Lightning Deal.

Lightning Deals

Also known as Category Specific Lightning Deals (CSLDs).

A Lightning Deal is a time- and quantity-limited promotional offer. For Seller-driven promotions, Amazon assesses an additional fee to participate in this program.

Deal Duration: 4-6 hours.
Lead Time: Minimum 4 weeks
Visibility: Amazon-Supported Deal (see above). Search result badging.
Restrictions: Product must have a minimum 3-star rating. Must be lowest price in trailing 90 days; cannot be run within 30 days following a Lightning Deal. For Apparel products, at least 65% of variations must be included in the product set. Seller Central: Must be a Professional Seller. Products must be recommended by Amazon; Sellers cannot submit products that have not been recommended for promotion. Products must be Prime eligible.

Best Deals

Also known as Savings & Sales.

Deal Duration: Up to 14 days.
Lead Time: Minimum 4 weeks.
Visibility: Amazon-Supported Deal (see above).
Restrictions: Minimum 20% discount off current price.

Free Shipping

A limited-time, free shipping offer for a subset of products. This promotion does not impact the Buy Box price.

Deal Duration: Up to 60 days.
Lead Time: 24 hours.
Visibility: Detail page messaging.
Restrictions: Seller Central only.

Subscribe & Save (SnS)

Subscribe & Save allows customers to schedule regular deliveries of products they purchase repeatedly using a subscription model.

Subscribe & Save customers select the product, quantity, and frequency of delivery. A 5% discount is applied per subscription. If a customer receives products from 5 or more subscriptions in a given month, they'll receive 10% or 15% off each subscription, depending on the product category. Additional information eligible product categories.

Combinability: Subscribe & Save discounts are combinable with other promotional offers, including Lightning Deals. Any coupons or promotions also apply to your Subscribe & Save-enrolled products. For example, if you run a promotion offering a 20% discount on a product that is available through Subscribe & Save, that discount will be added to existing subscriptions and will result in a total discount greater than 20% for subscriptions.

Deal Duration: Ongoing.
Lead Time: 4 weeks.
Visibility: Subscription enrollment and discounted pricing are integrated into the Buy Box.
Restrictions: Products must have an in-stock ratio of at least 85% for the trailing 30 days to be eligible for enrollment. Seller Central:  Seller account must be active for at least 90 days to be eligible for enrollment and have a 4.7-star rating or higher. Vendor Central: None.

Business-to-Business Pricing (B2B)
Business Price

A discounted price available to Amazon Business customers regardless of the quantity purchased. As an Amazon Business seller, you can create a Business Price on any of your offers.

Quantity Discount

Tiered discounts available to Amazon Business customers for high-volume purchases. As an Amazon Business seller, you can specify tiers for quantity pricing on your offers.

Deal Duration: Ongoing.
Lead Time: 24 hours.
Visibility: Available exclusively to business customers.
Restrictions: Seller Central only.