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Product Safety Scandals in China Fuel Cross-Border Ecommerce

Growth rates expected to remain in double digits through 2019

March 31, 2017 | Retail & Ecommerce

Interest in quality imported products in China has never been higher. eMarketer estimates cross-border retail ecommerce sales in the country will climb 29.1% in 2017 to $110.68 billion. Growth rates are expected to stay in the double digits through 2019, and sales will reach $157.70 billion by 2020.

Cross-Border Retail Ecommerce Sales in China, 2014-2020 (billions and % change)

One of the categories driving cross-border ecommerce in China in recent years has been health and wellness products. Because of environmental pollution and a number of food safety scandals that have rocked the country recently, consumers in China have developed an inherent suspicion of local food supplies.

That distrust spiked once again last week, after safety inspectors seized shrimp that had been injected with gelatin to make them look more appealing, resulting in an outcry on social media in China.

Data on cross-border ecommerce reflects the concerns of wary shoppers in China. For example, a December 2015 survey of cross-border digital buyers in China conducted by China Internet Network Information Center (CNNIC) found that milk powder and baby products, along with health and wellness products, ranked among the top four product categories purchased from foreign sites.

Products Purchased from Foreign Sites According to Cross-Border Digital Buyers in China, by Category, Dec 2015 (% of respondents)

Australia, which has a reputation for making healthy and natural products, has been a major beneficiary of this demand. Australia-based health product companies like supplement manufacturer Nature’s Way are looking to tap into China’s hunger for safely produced foreign goods. The company recently established a direct sales store on the cross-border platform of JD.com, JD Worldwide.

Using China-based ecommerce platforms like JD.com represents a better way for foreign retailers to reach consumers in China. A recent survey of consumers in China by Mintel found that 73% of respondents shopped for foreign imported products on domestic sites, compared with just 27% who used overseas-based retail sites.

Some brands in Australia have found a route outside of ecommerce platforms to get their products in the hands of consumers in China by tapping the network of personal shoppers known as “daigou,” who purchase goods in Australia for resale in China.

Alibaba this month even went so far as to send seven marketing influencers in China to Australia to promote the country’s products, with the whole trip documented on social media platforms like Weibo and Youku Tudou.

Australia isn’t even the top seller of goods to consumers in China. According to Alibaba and CBNData, Australia accounted for just 7.9% of foreign sales to digital buyers in China on its Tmall marketplace in 2016, behind Japan (19.3%), the US (18.3%), South Korea (13.6%) and Germany (8.0%).

Man-Chung Cheung

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