China’s 2013 policy change allowing third-party payment platforms to offer their customers cross-border consignments has generated a booming international e-commerce.
Chinese shoppers can now easily purchase goods from other countries over the Internet, allowing them to buy products that are entirely absent from or significantly more expensive in their domestic market. And the number of online shoppers continues to grow, as consumer interest in “Daigou,” or parallel channels for overseas shopping, increases.
Chen Chengzi, a seasoned international online shopper, noted the convenience of the process in an interview with China Daily.
“It’s quite simple. You just register an account, pick out the goods, choose a form of delivery and pay for it,” she said.
China’s new policy has not only made shopping more convenient and less expensive for its consumers, but also attracted the attention of international brands looking to expand their clientele.
Zara, a Spanish brand owned by Inditex SA, expanded its business to international e-commerce in 2010. Zara handles foreign business transactions independently through its website, hiring “a group of experts that monitors its global logistics system to ensure that any order received from China [is] handled directly by its Spanish headquarters.”
Zara isn’t alone. According to the Bain & Co. consultancy, over 50 express firms offer direct-to-China shipping.
Though Zara’s business approach is direct, it has its drawbacks—namely, costly shipping prices incurred on both buyer and seller. Other international businesses, such as Japan’s Uniqlo, have opted to process their transactions through a domestic third-party instead. Upon payment, Uniqlo redirects its customers to a page run by Alibaba Group, where the Taobao channel fulfills transactions and shipments. According to the Bain & Co. consultancy, almost 60 percent of consumers have done at least some luxury shopping via these domestic platforms.
Other brands, such as Gap, have sought a “hybrid model” instead. The American clothing company operates a website on Tmall.com, Alibaba Group’s business-to-consumer branch.
According to Xu Feifei, brand strategy director of the LabBrand consultancy, there are two significant factors involved in the Daigou boom.
“For luxury products, one major driving force is product prices; Daigou prices are usually cheaper than those in China. For products such as cosmetics, skin care, medicine or baby-related goods, consumers sometimes are willing to pay more money for Daigou, as they are looking for reliability and reassurance,” Xu said.
Despite the consumer enthusiasm, brands must keep cultural and practical considerations in mind. Burghardt Groeber, vice president of Hybris AG’s Asia-Pacific branch in Hong Kong, told China Daily that international brands “have to integrate fast search functions, offer popular promotions and, most important, launch China-specific products that are unique to the sites” in order to succeed in the Chinese market.
Groeber also noted “a growing tension” between brands’ official websites and domestic Chinese e-commerce platforms.
“If merchants sell certain items only through the original channel, there will be less dependency on Tmall in the long run,” Groeber said.
image credit: zara