China’s Not-So-Secret Plan for Global B2B E-Commerce Domination

In a definitive move to become the dominant player in B2B E-Commerce, China opened its first e-commerce industrial park in Hangzhou, Zhejiang province (110 miles south of Shanghai) in July 2013. The park, which is dedicated to supporting online exports, has sold its first products to the Ukraine, Denmark, and Spain.

But many more markets for B2B e-commerce can be expected to be reached from the e-commerce industrial park, as leading companies like Alibaba, as well as many logistics firms, have set up operations in the park. There are a large number of companies already at work seeking entry to set up operations there.

Companies in the park enjoy tax rebates and other preferential policies and expedited bureaucratic procedures for online exports.

China’s government has disclosed plans to build industrial parks in five cities to facilitate cross-border sales of Chinese products to online shoppers in other countries. In 2012, cross-border e-commerce trading was worth 2 trillion yuan (US$326 billion), and that was up 25 percent from the previous year. Overall e-commerce has expanded at a compound annual growth rate (CAGR) of 90 percent over the past five years, according to a report by Bain & Company.

But, as the Bain & Company report shows, payment issues continue to trouble the growth of e-commerce in China. There is an overall lack of confidence in payment methods, as well as no streamlined approach to handling B2B transactions so that the necessary data is linked to payments. Payment security was listed as a prime concern by a large majority of the respondents to Bain’s research.

Logistics also continues to be a challenge to China’s B2B e-commerce exporters. The field is still relatively undeveloped in China, with a lack of long-distance shippers who can work with the largest part of the B2B e-commerce market, as the Bain report points out. Logistics firms in China also need to upgrade the quality of their offerings. Many of the firms in the sector are already investing heavily to make the necessary improvements.

As the volume of cross-border e-commerce grows, payment protection will become increasingly important, especially in emerging markets like China. Companies that can offer such protection will quickly become the new winners.

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