What’s the Best China Strategy: In-Country or Cross-Border?
The Chinese economy is showing no signs of slowing down. China is one of the fastest-growing e-commerce markets in the world. Online sales are expected to top USD $1 trillion in 2019, roughly double that forecast for the United States. Many U.S. brands are already selling to China cross-border. For example, 50% of China’s cosmetics currently come from international brands, and most are sold through sites like Alibaba or JD.com.
At the same time, major U.S. brands like Starbucks have proven that they can succeed in China via a “brick and mortar” presence. In 2009 Starbucks had 250 stores in China. Now it has over 2,500. Buick sold nearly 1.2 million cars in China in 2016, representing 75% of its global sales.
So which is the best way to sell to China, what’s the best China strategy: cross-border or in-country?
Cross-Border versus In-Country China Strategy
The cross-border model has several advantages for exporters to China. For one, brands will face fewer roadblocks in terms of Chinese regulation, testing and approval. Products can be brought to market several months sooner versus in-country. For brands that are just bringing their products to market, the cross-border model facilitates trial and allows companies to test Chinese consumer preferences without too much investment.
The in-country model, though obviously requiring higher startup costs, does have its merits. First, shipping times are far shorter, with products arriving same-day or overnight in first-tier cities. From a Free Trade Zone, where cross-border products come from, shipping times are two to four days. Second, in-country brands can offer returns. Third, the market for in-country is far greater. The cross-border model on Alibaba, the Chinese Amazon, puts you in front of 100 million customers. Selling via Alibaba in-country, however, puts your products in front of over 550 million.
Whatever path you decide, Planet Payment is here to help streamline the process.
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