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Can Cross Border E-commerce Turn the COVID-19 Crisis into an Opportunity for Brands?

Updated: May 10, 2020

As the coronavirus pandemic continues, many countries are tightening their supervision on entry& exit, logistics, customs supervision; these aspects and the current market are testing the cross-border e-commerce industry.


Statistics show that since China’s lockdown on January 23, cross-border e-commerce imports and exports in Guangdong Province, China, has increased by 33.4% for the first two months of 2020 year-on-year. In February 2020, orders for imported cross-border e-commerce platforms such as Tmall International, JD.com, and Koala Haigou have surged. This indicates that as people are quarantined at home, consumer demand is further recovering and import consumption is becoming more normalized.


The central and local governments in China have issued a series of assistance policies to reduce the burdens on enterprises and promote resuming production. China Customs has sped up customs clearance and inspection, and the Ministry of Commerce has introduced measures to support the development of new formats and models of foreign trade, providing support for the long-term development of cross-border e-commerce. Under the pandemic, can cross-border e-commerce turn the COVID-19 crisis into an opportunity for overseas brands? The answer is YES.


China’s Cross-Border Sales Grow Against the Trend

On March 2nd, Alibaba International platform officially launched its new trade festival. According to the statistics from Alibaba, the total GMV of the whole platform increased by 91% year-on-year in the 12-hour opening of the new trade festival, and the number of customers increased by 62.8% year-on-year.


In February 2020, Tmall's sales of imported goods increased by more than 52% year-on-year. Consumer demands for imports have surged. For example, from 5th March to 8th March, the sales of imported household hair removal devices on Tmall International increased by 850% year-on-year; smear-type masks, whitening toothpaste, and men ’s skincare products are ranking as the hot-selling products.


Chinese Consumer Behaviours Impacted by the COIVD-19


In view of the urgent shortage of domestic medical supplies during the pandemic, many consumers flocked to import e-commerce platforms to search for imported disinfectants, household cleaning supplies such as sterilized laundry detergent and disposable hand sanitizer. The original popular categories on the Kaola Haigou platform such as nutrition and health care products, personal cleaning products may also usher in a new round of growth under the influence of the outbreak.


Another factor is that cross-border travel has been subject to certain restrictions due to relevant domestic and international measures during this difficult time. Thus, Chinese consumers who cannot go abroad may switch to cross-border e-commerce to meet the needs of purchasing imported products. It is believed that more consumers will go from "incidental use" to repurchase until normalization, the usage habits of cross-border e-commerce, and the demand for imported products are expected to achieve new growth.


Although most are facing supply chain and logistic pressure as the pandemic has diverted to western countries, export-oriented cross-border e-commerce will usher in rapid growth due to the global shortage of materials.


"Zhai" Economy, which is a Chinese buzzword meaning that people are preferring to stay at home and people's consuming behaviours have shifted.


Policy Support Enterprises to Save Themselves


In Feb, the Ministry of Commerce had proposed 20 measures to support the orderly resumption of work and production and development of new modes of foreign trade. The Ministry also organized China’s Second “Brand and Quality Online Shopping Festival” opening from April 28 to May 10, where more than 100 e-commerce platforms have participated, including Tmall Global, JD Worldwide, RED, Suning, PinDuoDuo, etc.


The General Administration of Customs has also launched new measures to reduce customs clearance and late fees, and further reduce the cost of customs clearance. For example, in Changsha, Hunan, the local customs have launched online operations, online services, and 24/7 customs clearance services. In Shanghai, the local government introduced 11 policies and measures including supporting enterprises to develop international markets, and the role of cross border e-commerce platforms has been greatly highlighted.


The cross-border import e-commerce platform will benefit from incentives such as simplified customs clearance procedures. Additionally, on 6th May China has approved another 46 cities to establish pilot comprehensive zones for large-scale cross-border e-commerce to revive foreign trade. These cities include Huzhou, Jiaxing in Zhejiang province, Datong in Shanxi province, etc. Pilot cities typically see their companies enjoy benefits such as tax abatement and government support to set up e-commerce platforms and international logistic services.


Negative Impacts of the COVID-19 on Cross Border E-commerce


Although the pandemic has stimulated cross-border e-commerce sales, the negative impact regarding commodity inventory, warehousing, supply chain, and cash flow, should not be neglected.


Supply chain disruption is the primary issue. Some studies show that insufficient inventory and supplies have become one of the most worrying issues for e-commerce sellers under the pandemic. However, as many factories in China resume work and production, the supply shortage situation is now improving.


Logistical obstruction is another difficulty. More and more countries around the world have declared a state of emergency, some of whom are in "wartime states." The resulting logistical obstructions will affect the timeliness of cross-border e-commerce logistics and may lead to goods returns and refunds. In addition, the restriction of entry and exit will also affect the development of new products of cross-border e-commerce, especially for the categories with high seasonal and logistics sensitivity.


Industry sources said that it will take some time for the supply chain to fully recover for manufacturers. From the perspective of consumers, in addition to specific products such as daily necessities, anti-pandemic materials, and other products in immediate need, orders for products outside of these categories will decline to varying degrees.

Wrap-up


As many provinces in China have eased the restrictions put in place to fight COVID-19, tourism is moving towards a gradual recovery with a significant boost over the Labor Day, things are returning to normality in China.


With the prediction of a local market crash, the near time survivability of international brands will likely heavily depend on the expansion into more robust economic territories. The shift in Chinese customers' buying behaviours and favorable policies enacted by the government has hugely strengthened the cross border e-commerce marketplace, thus the global crisis has showcased the values of online-based cross border business in this complicated time.

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