China’s multi-billion-dollar “haitao” splurge

 

 

 

“Internet Life”, a special stamp set, is issued by China Post to mark the 20th anniversary of

China’s internet era, at a postal office in Suzhou, east China’s Jiangsu Province, on April 20, 2014.   

Photo by Zhu Guigen

 

China officially gained internet access on April 20, 1994. Within two decades, internet has played

a vital part of the country’s everyday life. The special stamp set contains four commemorative

stamps with their respective themes (left to right) — “online communication” “e-commerce

“mobile connection” and “cloud computing”.    

 

 


View  |  http://www.extrabux.com/stores

 

 

 

China’s multi-billion-dollar

“haitao” splurge

 

 

By Wang Chenxi 

 

 

 

When Cao Lina finally finishes the online payment on the website of U.S. chain store Macy’s, she knows the pair of boots from a Christmas promotion is her last purchase of 2014.

“I’ve spent more than 31,000 yuan (about 5,000 U.S. dollars) this year – it’s mostly ‘haitao’ (buying goods online from overseas),” says Cao, 31, an accountant in Beijing. She started to haitao in 2012, and this year she’s bought a handbag from England, milk powder from Australia, honey from New Zealand and cosmetics from Japan.

She is among a fast growing number of Chinese online shoppers, most of them young, well educated and eager to buy foreign goods that are unavailable or exorbitantly priced in China. They are a multi-billion-dollar and still booming market for global e-retailers.

 

 

TRILLION-YUAN POTENTIAL

 

 

A report in September from market research company Nielsen said 18 million Chinese spent 216 billion yuan by haitao in 2013. It estimated the value would reach 1 trillion yuan in 2018 and the number of buyers 35.6 million.

According to Internet industry consultancy iResearch, China’s total online shopping sales hit 691.41 billion yuan in the third quarter of 2014, up 49.8 percent from the same period last year. The year’s total cross-border e-commerce – inbound and outbound – is forecast to grow 30.6 percent from 2013 to reach 4 trillion yuan, accounting for 14.8 percent of total foreign trade.

China’s Ministry of Commerce forecasts cross-border trade by e-commerce companies in China will be worth 6.5 trillion yuan in 2016.

 

 

POLICY SUPPORT

 

 

The impetus comes from the government. In August 2013, China’s State Council issued a policy to support cross-border e-commerce, with six concrete measures to facilitate processes, including Customs clearance, quarantine inspection, duties and foreign exchange.

To date, six cities – Shanghai, Hangzhou, Ningbo, Zhengzhou, Guangzhou and Chongqing – have designated import e-commerce pilot zones, where foreign goods can be stored in bonded warehouses before Customs clearance.

According to tax regulations in those cities, each order under 500 yuan (about 82 U.S. dollars) is duty-free, and each order from 500 to 1,000 yuan incurs a 10-percent tariff, compared with ordinary imported goods being taxed around 40 percent on average.

Some pilot cities have also simplified their Customs regulations. In south China’s Guangzhou, e-retailers can immediately register overseas goods with Customs when a Chinese buyer makes a deal, so tariff collection and other procedures are faster.

Under Guangzhou’s system, Chinese discount retailer Vip.com completed Customs clearance for 800 watches in just 40 minutes.

On November 11, the 22nd Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting in Beijing supported the trade with the APEC Cross Border E-Commerce Innovation and Development Initiative.

 

 

NEW OPPORTUNITIES

 

 

For e-commerce giant Amazon and its competitors, including NYSE-listed Alibaba, 2014 saw new opportunities to tap into this market.

On August 20, Amazon China announced it would begin cross-border online shopping in the Shanghai Free Trade Zone. Chinese buyers could go to Amazon websites in the U.S. and other countries to buy online and receive shipments in a week to 10 days with lower delivery costs.

Amazon has tactically changed the “proxy” mode of overseas online shopping, whereby a Chinese buyer pays a proxy to buy goods abroad, and the proxy dispatched the goods as personal items.

The proxy mode has several risks, such as fake goods provided by the proxy, delivery delays, and documentation and tax issues during Customs clearance. If all goes smoothly, a shipment by air from the U.S. could arrive in one month, or 20 days from Europe, 10 days from Japan.

Amazon’s bonded warehouses mode is easier and cheaper. With the help of data collected over the years, Amazon can forecast orders and send goods in advance by sea to Shanghai Free Trade Zone bonded warehouses. Amazon sends the items from Shanghai after a Chinese buyer makes a purchase.

Big players in China’s e-commerce sector, such as Alibaba and NASDAQ-listed 360buy, have followed Amazon to open haitao channels.

Moreover, Alibaba uses its global payment system, Alipay, to bring in more players from abroad, including U.S. retailing giants Macy’s, Bloomingdale’s, Saks Fifth Avenue and Neiman Marcus, and luxury brands like Prada and Hugo Boss.

Chinese consumers can log on to foreign retail websites and pay in RMB through Alipay, which includes duties and delivery costs. Then they wait a week or two to receive the goods, which can be tracked online. This also avoids the risks of using proxies.

 

 

SHOPPING SPREE

 

 

Singles Day (November 11) set a new China record for online shopping. For Alibaba alone, online sales of Tmall.com, Taobao.com and its overseas outlets hit 57.1 billion yuan that day.

The stunning sales encouraged Alibaba, Amazon and other competitors to promote Black Friday, the big sales day after the U.S. Thanksgiving holiday.

Amazon China announced Black Friday discounts enjoyed by U.S. shoppers on its website. Macy’s, Bloomingdale’s, Saks Fifth Avenue and Neiman Marcus and others had Chinese-language webpages, saying they accepted RMB by Alipay.

IT news website PingWest reported Metao.com, a website dedicated to foreign goods, registered sales of more than 20 million yuan that day. Another haitao website, ymatou.com saw sales of 100 million yuan over five straight days around Black Friday.

Alibaba and Amazon declined to reveal their sales numbers, suggesting a worse-than-expected result. Some buyers found the offers too limited; others had reached their spending limits on Singles Day.

Macys.com president Kent Anderson said he hadn’t expected big Black Friday sales in China this time, but it would help sales growth in future. Macy’s had selected about 100 items to sell online for its China debut.

For Cao Lina, Black Friday was fruitful. She bought U.S.-made fish oil capsules and vitamin tablets for her parents, who live in southwest China’s Sichuan Province. Ten days later they received the parcel sent from bonded warehouses in neighboring Chongqing.

“My parents are happy, and next time they want to do their own haitao,” she says.

 

 

 

 

 

 

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