The Dramatic Rise of Chinese Cross-Border SpendingJuly 17, 2016    By : Monica Eaton-Cardone
We’ve heard for years about the massive, still-growing power of the Chinese consumer market. At this point, it’s no secret that the world’s second-largest economy offers tremendous opportunities for international retail merchants.
However, the recent figures published by eMarketer suggest that international merchants have barely begun to feel the boost from Chinese consumer spending.
Chinese retail spending to reach $158 billion by 2020
Cross-border Chinese consumer spending is expected to increase by nearly 75% over the next four years, rising from $86 billion in 2016 to $158 billion by 2020.
The boost in sales can be attributed to the roughly 50 million more Chinese consumers expected to make international retail purchases during the same period. Each of these shoppers will spend an annual total of $473 dollars with overseas merchants.
This is a great opportunity for international sellers to capitalize on a large and fast-growing economy. However, it helps to understand what factors draw Chinese consumers to the international market in the first place.
Consumers seek quality and fair prices
Surveys among Chinese consumers suggest that roughly 68% of those who shop at international retail outlets do so because of the quality of the products.
There is a demand for luxury Western goods, especially among middle- and upper-middle-class Chinese consumers.
Items such as fashion wear and high-end consumer electronics which are relatively scarce or not yet released in China are hot commodities for online shoppers. This is especially true in smaller cities or rural areas, where items marketed as luxury imports often have a reputation for being cheaper, domestic knockoffs.
Baby products are another area in which Chinese consumers are willing to pay a premium for imported goods due to widespread concerns about the quality and safety of domestic products. For example, millions of Chinese parents elect to buy baby formula produced overseas. So much so, in fact, that Chinese demand for baby formula is alleged to have caused a shortage of the product in Australia last year.
In addition to concerns about quality, 66% of respondents to the poll cited affordability as a prime motivator for buying foreign-made goods.
The importing of consumer goods within China exploded quickly due to a period of very low taxes on cross-border retail imports. In recent months, however, the Chinese government began tightening that loophole, raising taxes on certain consumer goods bought from foreign sites in an effort to encourage more domestic consumption.
However, despite the new tax arrangement for retail imports within China, companies are still optimistic about their growing prospects within the country. As eMarketer forecasting analyst Shelleen Shum suggests, “The demand for foreign goods via the cross-border e-commerce channel is still expected to remain strong due to better prices compared to offline retailers, perceived quality and better variety.”
Tmall, the consumer end of Chinese e-commerce behemoth Alibaba, works with retailers including Costco, Lotte Mart and others to offer a wide selection of foreign goods to Chinese consumers. Of course, Amazon also makes select foreign products available through its own native site, Amazon.cn.
Domestic FinTech still popular with Chinese consumers
It’s not just Western consumer goods attracting attention from Chinese consumers.
Apple Pay had an impressive initial showing when the company first made the service available in China earlier this year. One of the country’s leading banks reported signing up 3 million Chinese consumers within the first two days of offering the service.
Despite that apparent success though, foreign competitors still have a long way to go in order to catch up with reigning champion, Alipay.
Alipay is a disruptor in the Chinese FinTech field. Even the country’s ubiquitous payments giant, UnionPay, is having trouble keeping up. What we can infer, therefore, is that Chinese consumers are not simply enticed by the “foreignness” of certain goods—they are conspicuous consumers.
Only time will tell
In the case of imported goods, Chinese consumers opt for what they perceive to be the best bang for their buck, which in many cases, is foreign-made goods. However, when a locally-produced alternative works just as well, Chinese consumers seem happy enough to stick to what they already know.
Only time will tell if consumer preferences will hold strong and continue to provide immense earning potential for international retailers.
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- The Dramatic Rise of Chinese Cross-Border Spending - July 17, 2016