Exporting to 37 countries and regions with an annual export value of RMB 50 million — few would expect that this performance was made by New Newton International Trade (Tianjin) Co., Ltd., a small company with just 21 employees.
Thanks to the continuous lowering of global trade barriers with the application of technologies such as digital payments, start-ups, micro and small businesses like New Newton International Trade (Tianjin) Co., Ltd. have been flocking into cross-border e-commerce industry since last year.
How did these businesses emerge? What new trends have they brought to cross-border e-commerce?
A lecture about cross-border business is held at China Xiamen International Cross-border E-commerce Industry Exhibition on June 12, 2021.
No Exclusive Playground for Big Companies
What is it like for a small enterprise to do cross-border e-commerce?
The recent 2020 Cross-border E-commerce Industry White Paper issued by market research agency CBNData made a profile of such enterprises: they are typically micro and small businesses, and many are start-ups with less than 100 employees; they can make good use of digital platforms to quickly perform complex business operations that could only be done by large companies in the past, such as product selection, procurement, sales, logistics, customs declaration, payment settlement, and foreign exchange tax rebate. An average of 3.56 overseas sites are operated by each company, and most companies serve three or more overseas markets; even during the pandemic and in the complex and volatile global situation, they still achieved 130 percent sales growth on average.
New Newton is a typical company of such kind. Established in 2015, the company mainly engages in the export of forklifts. Under the influence of the COVID-19 pandemic, in 2020, New Newton achieved an export value of RMB 50 million through the international online marketplace of Chinese e-commerce giant Alibaba Inc., an increase of more than 100 percent over 2019.
“We expanded in more than 20 overseas markets last year. Currently our forklifts are sold to 37 countries and regions overseas, among which Germany, the U.K., Canada, Spain, and Saudi Arabia have the highest sales,” said Qiu Yibo, New Newton’s general manager.
Micro multinational companies like New Newton have sprung up like mushrooms since last year. Take the overseas trading platforms of Taobao and Tmall, all owned by Alibaba, as an example, more than 150,000 small and medium-sized retailers joined the platforms in May 2020, eight times more than 2019.
Zhubi Crystal Crafts Co., Ltd. in Jinhua, Zhejiang Province, is mainly engaged in selling crystal beads, and has operated a retail store in Yiwu for 10 years. Last year, the booming “stay-at-home economy” overseas spurred an exponential increase in the company’s sales.
“Last year, we gained more than double the number of new customers from the previous year through online sales, and our sales increased by 80 percent year on year,” said Lü Rihong, who runs the crystal craft company. Through Alibaba’s China-U.S. shipping logistics service, freight costs are reduced by 50 percent, while the shipments can be delivered to U.S. buyers within 20 working days, said Lü. “I have a customer who previously only purchased goods worth US $1,000 each time, but now he carries out purchases worth US $10,000 each time.”
With the joining of micro multinational enterprises, cross-border e-commerce was no longer exclusive to large companies. According to the white paper, participants in the cross-border e-commerce market have evolved from large companies to start-ups and small companies. With the help of digital platforms, they are able to operate multinational markets, become micro multinational enterprises, and provide global buyers with diversified made-in-China products and customized services.
“It used to be unimaginable for a single micro or small enterprise to do multinational export business,” said Zhang Jianping, deputy director of the academic steering committee of the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce. Cross-border e-commerce platforms can connect procurement, sales, and logistics, making it easier for micro, small, and medium-sized enterprises to expand overseas markets, he said. “This creates unprecedented new development opportunities. They seized the opportunity to become new players in the field of cross-border e-commerce.”
A visitor walks by the exhibition booth of Alibaba.com at the fifth Global Cross-border E-commerce Conference, which is held in Zhengzhou, Henan Province on May 11, 2021.
Unimpeded Channels
Why did these micro multinational enterprises go abroad smoothly and become popular? Behind this is the ever-increasing scale of cross-border e-commerce transactions.
According to data from the General Administration of Customs, China’s cross-border e-commerce imports and exports reached RMB 1.69 trillion in 2020, an increase of 31.1 percent from the previous year. Exports were the leading contributing factor for the increase. In 2020, the exports figure reached RMB 1.12 trillion, up 40.1 percent. During the first quarter of this year, China’s cross-border e-commerce exports grew faster than imports, with the rate reaching 69.3 percent.
The rapid growth of micro multinational enterprises is inseparable from the enabling environment created by policy support. Since the establishment of the China (Hangzhou) Cross-Border E-Commerce Comprehensive Pilot Area, the first of its kind in China, in 2015, such areas have expanded presence across 30 provincial-level regions, reaching 105 in number. In March this year, six central departments including the Ministry of Commerce and the National Development and Reform Commission jointly issued a circular, expanding the the scope of the pilot programs to cover all cities and regions where there are free trade pilot zones, cross-border e-commerce comprehensive pilot zones, comprehensive bonded zones, demonstration zones for import trade promotion, and bonded logistics centers.
Improving logistics support and payment services have underpinned booming cross-border e-commerce.
Cross-border logistics services continue to improve. China’s logistics demand for cross-border e-commerce exports is relatively high globally. According to data from the State Post Bureau, from August 2019 to July 2020, among global cross-border e-commerce packages, 60 percent were sent from China. Skyrocketing demand has set higher requirements for logistics services. Overseas fulfilment centers have emerged. In addition to storage, they have also incorporated comprehensive functions, such as shipment and sales, providing professional warehousing services for cross-border sellers, reducing logistics costs while improving efficiency.
Cross-border payment services are becoming more convenient. According to the white paper, cross-border payment platforms reduced the cost of financial services by technological means, attracting more users. The method is also fast, convenient, and safe, becoming an indispensable way of settlement for cross-border businesses.
New Newton uses a digital payment service which features one-day payment settlement. “I can receive payments within a day, while in the past it took at least two to three days,” said Qiu, explaining that to withdraw buyers’ payment, he needed to go to the bank and submit various documents. “The procedure has become very simple, and saved us a lot of time and personnel inputs, which is vital to small businesses like us,” Qiu said.
Integration into the Global Market
The overseas market of Chinese sellers is still expanding. The white paper said that nearly 60 percent of sellers have made online shopping available to buyers from at least two countries via the Amazon.com platform, and 82 percent of sellers plan to open new online store overseas.
The North American and European markets are the most mature and the first choice of more than 50 percent of cross-border e-commerce retailers. It is worth noting that the Southeast Asian market has been very prosperous in recent years and has become the third largest emerging market.
Emerging cross-border e-commerce platforms, such as Lazada and Shopee in Southeast Asia, introduced various incentives to attract Chinese retailers. In addition, e-commerce platforms, such as Mercado Libre and Noon in Latin America and the Middle East, are presenting a promising future for cross-border e-commerce.
“The penetration rate of e-commerce increased significantly in foreign markets in 2020. Buyers who were accustomed to offline purchases have switched to online platforms, bringing huge new growth. This is a godsend for us,” said Qiu.
Chinese sellers are building up partnerships with increasingly more overseas cross-border e-commerce platforms and are deeply integrated into the global market. “Micro multinational enterprises are swift in responding to market demands and have created a new model that meets the needs of the ‘stay-at-home economy’ amid the pandemic,” said Zhang Jianping.
Analysts predicted that 2021 heralds the next investment opportunities of digital foreign trade. According to Zhang, there will be increasingly more micro multinational companies in the future, which are expected to become the main force of China’s exports. “Micro multinational companies have met the needs of diversified market demands and can also tap into segment markets whose demands are not so high. Even when the global pandemic subsides in the future, micro multinational companies will still continue steady growth because they can meet the new trends and new demands of market expansion,” Zhang said. The Regional Comprehensive Economic Partnership is also a boon for micro multinational enterprises, he said.
As of April 2021, New Newton has completed an export value of RMB 20 million. “It is expected to achieve RMB 80 million this year, which is still a conservative estimate. The real peak season for foreign trade in the forklift industry is from July to December, and the increase may be much bigger.” said Qiu, who is confident in expanding its overseas market this year.
XU PEIYU is a reporter at People’s Weekly.
