(#5) 'Why now' series: Emergence of China B2C x-border e-commerce
China has created large powerhouses (Shein, TikTok Shop, Temu, Wish, Aliexpress) in cross border B2C commerce owing to its high quality, low cost manufacturing capabilities. But the interesting part is that this trendline is not very old and inflection came only post 2014. And what an inflection - their x-border ecom sales grew from <$10b to $300b+ in 10 years!
Such steep J-curves are rare and often beg the question - what changed? What was the 'why now'?
The biggest contributor surprisingly is Amazon. Back in 2013, they were miserably losing in domestic ecom to Ali/JD in China. This prompted them to explore avenues to boost relevance and they decided to double down on enabling small China sellers to export to US. They aggressively onboarded, educated these sellers on cracking perf marketing / right PDP and pricing in US led to China. This led to these small sellers making up 60%+ of all global AMZ sellers and 35%+ of all AMZ's 3P GMV. It's these same set of sellers that are now on Temu, AliExpress, TikTok (main catg. being design oriented/ unbranded - home/ fashion/ sports/ electronics accessories)
Post 2014 was also a time where China govt. aggressively simplified e-com export norms (e.g., separate ecom export hub with fast customer clearance and limited paperwork), leveraged China Post for deliveries and provided supplier subsidies.
Things accelerated even further when Chinese companies (Shein, TikTok, Temu) explored drop-shipping models which saved them huge import duty taxes (via the De Minimis rule - low tax/ minimal scrutiny for items <$800) in the US, making their prices even better than before.
These were just tailwinds. But it's hard to miss how special China mfg set ups are. Not only are these extremely low priced (50%+ cheaper vs global peers) but they are agile and innovation focused (60% of these seller sales are generated by new product launches that happened in past 12 months). This has also led to at least 100+ sellers that do $100m+ x-border GMV sales annually on ecom with Anker (portable charger seller) doing $2B+ sales(!) annually.
Now history doesn't repeat itself, but it often rhymes. A similar movement of building global brands from india is just starting to explode.
More in Part 2.
Very insightful! I feel this De Minimis rule would already be on US govt's radar for changes, but still, I would bet that these Chinese orgs would find alternate solns to those changes / loose out on some margin only
Those numbers are staggering ... 100 entities with north of $100M in cross-border sales each, shows how broad-based this ecosystem development has been for Chinese institutions.
So the inflection point of Amazon + common-benefit State export policy & taxes + quality manufacturing prowess leveraged by all suppliers? Lethal combo to drive B2C (or even B2B) exports!