Selling products to Chinese consumers

Hi , just wanted to raise this issue as it could be of interest, if not please disregard.

We are based in Hong Kong and sell our products to other countries with almost everything made in China these days. Over recent times we are finding that the Chinese consumer market has developed quite strongly along with a growing number of middle class who buy products online regularly. The Chinese consumer has a preference to buy foreign products rather than buying locally made because they know that they will get higher quality. Foreign branded products now make up a large portion of online sales in China.

The issue at the moment seems that the cost of entry is really high as only a few online sellers have a stranglehold on the foreign product online sales in China. There are normally two or three middlemen involved in the process and fees involved take up a significant amount of sale price.

Given this, we are floating the concept of setting up our own selling platform specifically for the Chinese consumer for certified non Chinese brands and products not made in China. This platform would allow you to buy products locally made in your country, manage your online listings in China, get paid, have our Chinese speaking customer service to answer any questions from customers and assist in the sale process, deal with customer returns back to Chinese local warehouse (for dead on arrival or other customer type returns), have full customer service and support in English to sellers via livechat etc.

We can take care of all of the online marketing , promotions, social media marketing etc within China. Our plan is to make it super easy for Chinese consumers to purchase in their own currency and also for sellers to overcome easily the critical barriers- getting paid, language, cultural, type of products to sell and also the day to day interaction in managing listings, order processing, shipping etc.

Anyhow, if any of this is of interest to anyone, I would really appreciate any feedback about if it would be a viable option for your business. What sort of things would be critical for your business to be able to sell products to China in this way?

thanks for your time reading this post.

It's a very interesting idea and one that I'm sure plenty should be interested in discussing. You're absolutely right of course, the Chinese market is completely transforming itself and a lot of middle class cash is flooding into the market. India is another sleeping giant currently undergoing the same sort of middle class transformation in its economy.

So looking for forward to hearing others views on this one, but I like the concept.

Hi Bosco.

You have caught my interest. I sent you a PM with a few questions. I am looking forward to hearing from you soon.

Thanks.

Dale

Hi Dale, thanks for your questions.

Products can enter China in a few ways depending on the the type of product and most economical way to ship it to the Chinese consumer.
Option 1 would be to ship it directly to the consumer via couriers such as DHL, Fedex, EMS, UPS or any other similar type of service from your country. The service would need to have full tracking so that location of the shipment can be tracked at any time during the shipment. This would be maybe suitable for items of low weight and size but high value.
Option 2 - you can move stock in bulk to say to a Hong Kong warehouse that provides 3PL services as well as courier services to mainland china. Hong Kong is a free trading zone so there is no import duty on bulk moved stock. There may be duties and taxes only when the good enter China.
Option 3 would be to bulk move stock to a bonded warehouse located in mainland China. There are quite a few bonded warehouses in China that provide 3pl services as well as arranging courier deliveries in China. Goods that enter bonded warehouses in China dont need to pay import duty as they are classified as not officially passed through China customs. As the items are sent individually to Chinese consumers, then the import duty/taxes are then applied.

Our platform that we intent to develop will be similar to a Amazon type of interface where you can add your listing descriptions (in english) add product photos, and other item particulars as well as the shipping method you will use, selling price in Chinese RMB. If using Option 1, then the only thing we need to provide is the translation of the product description into Chinese language and also the customer service to customers. Option 2 and 3 would involve third party warehousing and logistics providers who can arrange the pick of the item, book and arrange the delivery and provide the tracking number back to you for update. We have an associate company in Hong Kong that has warehouse facilities and also can provide the delivery service into mainland China. The service would have web based inventory control and order management. Our selling platform could also interface with this provider so that orders can be sent to the warehouse for despatch and tracking numbers updated on each order automatically.
As for fees, we have not finalized this but it would be commission based on products sold ~8-12% (which includes all payment processing fees) . Apart from this would be additional items like translating of the product listing and the Chinese phone/livechat customer service support that we would provide. At this stage we are unsure if a fixed monthly fee would cover it or these would be optional extras.

As for minimums , if you are shipping under option 1, then you can ship one at a time. There is really no minimum weight or size. I suppose it just needs to be something that you can make money on after to take in account the shipping cost and fees involved.
Under option 2 or 3, I suggest the most cost effective way is to have a product volume at least 10 cubic meters (CBM) or about half a 20' container, as a rough guide. As you would have to take in account, sea freight, import charges, HK or China storage fees etc.

The brands that we would not sell would be Chinese brands or products that have been made in China by Chinese companies. Some brands that are made in China but the whole production process is managed by a foreign company would allowed (eg.some technology products like Apple, Samsung) Also those brands need to be genuine brands and you are either the owner of that brand or authorized to sell that brand. This is important as Chinese consumers are well aware of the many fake brands out there , especially as most of them actually come from China. The Chinese consumer is prepared to pay more but the product needs to be genuine.
All the well known brands are well received by the Chinese market. The type of product categories that Chinese consumers are currently buying range from health related, vitamins , supplements, luxury goods, clothing, wines, milk powders and baby formulas, baby related products, cosmetics, beauty products, technology related products (cameras, computers, phones) etc. The product range is really quite wide. Products that are unique to countries outside of China would be sought after, particularly if they go through high levels of quality control, the factory is heavily regulated, the materials used in the product are of high quality.

Tariffs can vary as some countries have free trade agreements with China so it depends on the country of origin and also the actual product type. Early this year, the Chinese government has reduced imported tariffs on imported goods in an effort to stimulate internal demand. Main reason is that Chinese shoppers load up on foreign goods when they are travelling overseas and bring them back with them. Local shops in China selling the same foreign goods are 20% higher in price and miss out on those sales. The Chinese government hopes the reduction in import duty will get those shoppers to buy those foreign goods from the local Chinese resellers. Some articles about that are here:

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On the duty side, a summary of China import duty is here:
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you can also use the calculator to work out what it would be for different types of products. Products with a value of 50 RMB (~8 USD ) are import duty free, but it depends on the sending country as there are preferential rates and exemptions that apply.

Anyhow, I hope the information is useful and thanks for the feedback.

Hi bosco,
We are already shipping to and from China but your idea has caught our attention. How can we get in contact to discuss in more detail.?

You can email me directly Link hidden: Login to view or through skype: philp4

Philip

Hi Phillip,
100% agree that the chinese market is changing really quickly. The 'daigou's are changing the landscape in Australian retail. They're basically personal buyers that are literally making and breaking new brands overnight, it's crazy. It's primarily on WeChat and Taobao platforms but I'm waiting to see how a more sophisticated model will change this booming industry because new government regulations is clamping on this untaxable industry. Currently it's very word of mouth within small influencer groups but with over a billion people, there's a lot of them :) Our products are positioned for the Chinese market, specifically travel retail for the last 15 years ranging in Duty Free stores around Australian airports so we've really kept our ear to the ground regarding the Chinese market.
We've also created a drop shipping program if you want to check it out at Link hidden: Login to view for those who do have access to Asian markets. Vitamins are booming everywhere.