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December 11, 2017

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Consumer glee: the world is our emporium

Shanghai resident Fiona Jiang began comparing prices when she wanted to buy a new Gucci handbag. She looked at the price tags in both physical stores and online shopping sites doing business in imported goods.

Her conclusion: prices online were cheaper, and ordering and delivery were no obstacles to a digital purchase.

“Most cross-border online retailers now have efficient online tracking systems, making the shopping process much easier and trustworthy,” she said.

Jiang said she also enjoys reading product reviews posted by other online buyers, which she thinks are more reliable than the rehearsed sales pitches of typical shop staff.

The retail scene in China is indeed becoming more international and more discerning. Digital commerce allows people in one country to easily buy goods from another country without ever leaving home. And people in China have demonstrated their zeal to buy foreign goods that they deem to be of better quality or that they think confer more social status.

Many Chinese consumers used their fingers to buy bargains on America’s “Black Friday” sales extravaganza on November 24. Black Friday traditionally marks the start of the US Christmas shopping season, which is said to put retailers “in the black” for the first time every year.

In China, NetEase imported goods arm Koala reported sales from Black Friday rose nearly fivefold from a year earlier, adding steam to the company’s aim to become the top-selling import online platform in the next three years.

Amazon’s Chinese site said sales of imported goods have surged 22 times since it first launched the service in 2014.

The value of import e-commerce in China this year is expected to surge 55 percent from 2016 to 1.85 trillion yuan (US$277 billion), according to private Internet consultancy China E-commerce Research Center.

The rapid rise in cross-border retailing has been facilitated by the gradual easing of government restrictions on imports. Free trade pilot zones have been authorized, where merchants can import and store goods for sale in China. The zones provide storage in bonded warehouses free from commercial import duties and consumers can purchase them without having to switch to foreign shopping websites and services.

The State Council, China’s cabinet, set up its first “cross-border e-commerce” pilot zone in Hangzhou in 2012. Early last year, the program was expanded to 12 more cities, including Shanghai.

Chinese online retail sites such as Tmall Global, JD Worldwide and Koala now facilitate the purchase of a wide variety of overseas products on platforms already familiar to Chinese buyers.

Consumers are now in a better position to shop for niche products instead of being forced to accept what’s available in the mass market of consumer goods.

Foreign luxury goods have long been a draw card for Chinese consumers, even before the digital shopping craze took hold. They remain a top engine for growth in e-commerce.

At present, online channels account for only about 9 percent of luxury sales, but that figure is expected to rise to 25 percent by 2025, according to Bain & Co. Online retail sales this year alone are expected to climb by a quarter.

Faster delivery

Yangmatou, a Shanghai-based online platform, hosts more than 80,000 offshore vendors offering about 800,000 items. It reported five-fold increase of Black Friday sales this year, and the company is encouraging merchants to offer more individualized services, such as guaranteed returns and refunds on products.

More than 80 percent of Yangmatou’s orders are shipped within four days, compared with about 40 to 50 percent at the beginning of the year. Nearly half of the merchandise shipped from overseas destinations are handled by the cargo arm of China Eastern Airlines.

While it’s true that price is a big factor in consumer decision-making, buyers of imported goods also pay close attention to delivery efficiency and after-sales services, according to a survey by China E-commerce Research Center.

The average spend per buyer is expected to hit US$882 in 2017, according to eMarketer.

The Ministry of Finance last month reduced import tariffs on 187 categories of consumer goods, scaling them from an average 17.3 percent to 7.7 percent. The reductions, which took effect this month, are expected to unleash a new buying spree.

Matthew Crabbe, Mintel International Group director of Asia-Pacific research, told Shanghai Daily that the reduction will open the door to more foreign brands in China, but merchants will also have to beef up their physical presence in the country to establish more intimate rapport with customers and improve after-sales services. More attention needs to be paid to informing consumers about the quality of products.

“Chinese consumers care more about quality and service than price,” he said. “And with their spending power on the rise, they have a wide range to choose from, regardless of whether the product originates here or overseas.”

Imported-goods merchants are exploring new business models to increase efficiency and attract more consumers.

Fengqu, the cross-border e-commerce arm of SF Express, last month launched a supermarket selling imported goods with a digital payment system and no cashiers.

Unmanned shops have become the latest trend in the retail industry, but are they merely a passing gimmick or the face of the future?

“They create little value for shoppers or vendors except to stir an initial buzz,” said Wang Wei, managing director at Digital McKinsey for China. “They are merely a novel way to shop.”


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