Quest for qual­ity trumps taxes, prices

China Daily (Canada) - - DEPTH - By SHI JING in Shang­hai shi­jing@chi­

Cross-border e-com­merce con­sumers in China should no longer worry that prod­uct prices­may rise due to newreg­u­la­tions on taxes, lead­ing in­dus­try play­ers have re­as­sured.

Prior to the new reg­u­la­tions that took ef­fect on April 8, per­sonal or­ders were treated as postal ar­ti­cles and sub­jected to a rel­a­tively lower postal tax.

Since April 8, how­ever, such or­ders have been clas­si­fied as im­ported goods and faced rel­e­vant tar­iff, a value-added tax and consumption tax.

A sin­gle cross-border e-com­merce or­der could now be worth up to 2,000 yuan ($301). A con­sumer is al­lowed to im­port goods worth 20,000 yuan a year via cross-border e-com­merce chan­nels.

Or­ders ex­ceed­ing the lim­its at­tract full tax rates ap­pli­ca­ble to gen­eral trade. Makeup prod­ucts and per­fumes are sub­ject to an ad­di­tional 30 per­cent consumption tax.

Wang Zhix­i­ang, vice-pres­i­dent of Zhen­, an e-com­merce player deal­ing in lux­ury goods, said the newreg­u­la­tions will have the most im­pact on those that sell low­priced stan­dard prod­ucts, watches, bags and the like. Those sell­ing higher-priced clothes and shoes may not be af­fected much.

E-com­merce ma­jors will ab­sorb the new taxes with­out pass­ing them on to con­sumers. This means, prices won’t he said.

For in­stance, Tmall In­ter­na­tional, Alibaba’s cross-border e-com­merce plat­form, has said it has no plans to raise prod­uct prices. The av­er­age 10 per­cent rise in tax is ac­cept­able for over­seas brands that are sold on it, Tmall said.

Like Tmall, dis­count e-re­tailer said it will ab­sorb the new taxes and pay for the de­liv­ery fees as well. It is pop­u­lar among con­sumers for its spe­cial prices for lux­ury brands such as Burberry, Ver­sace and Fendi.

Feng Jialu, vice-pres­i­dent of, at­trib­uted the de­ci­sion to long-es­tab­lished di­rect deal­ings with over­seas brands. Also, its agents buy prod­ucts in nine coun­tries, which helps elim­i­nate in­ter­me­di­aries and saves on costs.

Jack Chuang, part­ner at OC&C Con­sul­tants Greater China, a global mar­ket con­sul­tancy, said, “Over­seas brands in both lux­ury and nor­mal seg­ments show a huge dif­fer­ence in prices in China and other mar­kets. But to at­tract Chi­nese con­sumers, some e-com­merce play­ers are will­ing to ab­sorb someof the tax rises, so that the price dif­fer­ence doesn’t get too big.”

Sun­ uses a com­bi­na­tion of gen­eral trade and cross­bor­der e-com­merce to pro­vide prod­ucts at rea­son­able prices to con­sumers.

Cross-border e-com­merce plat­forms in China have grown rise, rapidly in re­cent years, in­terms of sales of lux­ury prod­ucts. Through them as well as over­seas web­sites, Chi­nese con­sumers bought lux­ury prod­ucts worth 48 bil­lion yuan ($7.39 bil­lion) in 2015.

That ac­counted for 12 per­cent of the to­tal lux­ury consumption in 2015, ac­cord­ing to mar­ket con­sul­tancy Bain& Co.

Ina sur­vey jointly con­ducted by dig­i­tal pay­ments com­pany PayPa­land­mar­ket con­sul­tancy Har­ris Poll, 53 per­cent of the 1,313 in­ter­viewed con­sumers said they mainly shop for clothes, shoes and ac­ces­sories on cross-border e-com­merce sites. The av­er­age amount spent by a con­sumer worked out tobe$485. Some41 per­cent of the in­ter­vie­wees spent $512 on each or­der. Makeup and skin­care prod­ucts are pop­u­lar.

Ac­cord­ing to theMin­istry of Com­merce, there are more than 5,000 cross-border e-com­merce plat­forms in China. The to­tal im­port and ex­port vol­ume of these plat­forms is ex­pected to reach 6.5 tril­lion yuan this year.

Chuang of OC&C Con­sul­tants thinks the new­pol­icy will likely elim­i­nate some of the smaller play­ers as they would not be able to ab­sorb the rise in taxes.

Nearly 46 per­cent of the 1,447 con­sumers sur­veyed by Bain & Co said they have used cross-border e-com­merce plat­forms to shop for lux­ury goods last year.

That is an­other rea­son why the rise in tax has been less of a con­cern for e-com­merce play­ers. Price has be­come less im­por­tant to a grow­ing num­ber of Chi­nese con­sumers, es­pe­cially those who buy lux­ury prod­ucts.

Ac­cord­ing to a re­cent sur­vey on on­line lux­ury spend­ing re­leased by KPMG, one-third of the 10,150 re­spon­dents had made lux­ury on­line pur­chases at full, non-dis­counted prices last year. Con­sumers said they value the ori­gin of lux­ury prod­ucts, a prod­uct’s unique fea­tures and its over­all qual­ity.

“China’s mid­dle class has risen with the coun­try’s eco­nomic de­vel­op­ment. They opt for cross-border e-com­merce plat­forms for bet­ter qual­ity and more trust­wor­thy prod­ucts,” said Matthew Lee, vi­cepres­i­dent and gen­eral man­ager of PayPalNorth Asia.

The new reg­u­la­tion is good news to large e-com­merce plat­forms. We have the bar­gain­ing power.”

In or­der not to dis­rupt the boom­ing cross-border e-com­merce in­dus­try, the cen­tral gov­ern­ment has come up with a num­ber of poli­cies, reg­u­la­tions and mea­sures. The es­tab­lish­ment of 10 cross-border e-com­merce com­pre­hen­sive pi­lot ar­eas in Hangzhou, Qing­dao, Shang­hai and other places is one such mea­sure.

This ap­pears to be en­cour­ag­ing ex­ist­ing ma­jors to con­sider ex­pan­sion. Feng of said, “The new reg­u­la­tion is good news to large e-com­merce plat­forms. We have the bar­gain­ing power. The ad­min­is­tra­tive body has re­leased a full list of goods that can be le­git­i­mately im­ported by e-com­merce plat­forms.

“So, we are plan­ning to in­tro­duce more brands in the near fu­ture.”

Thibault Vil­let, chief ex­ec­u­tive of­fi­cer of, a plat­form spe­cial­iz­ing in flash sales of lux­ury goods, re­vealed sim­i­lar plans. He said, with help from Alibaba, plans to in­tro­duce more lux­ury brands in the Chi­nese mar­ket in the next few months. Alibaba in­vested $100 mil­lion in last July.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.