Cross-border online sales help foreign brands skirt approvals Market may triple if regulations don’t curb sales....
When Healh Supplements Giants are blocked in ChinaHealth supplements must undergo a registration and approval process in China that costs the company based in Wisconsin about $ 100,000 per product, said James Konkle, director of international operations. With 37 products on the Chinese market, Nature's Way paid $ 3.7 million before making its first sale of vitamins. Three years ago, Schwabe North America Inc. opted for an alternative route to China's vitamin and supplement market of 134 billion yuan ($ 19 billion).
Known as cross-border e-commerce, the stunning back door avenue allows Chinese consumers to buy foreign-manufactured goods online and effectively circumvent regulatory issues that have impeded access to consumer products from cosmetics to Cognac. Faced with pressure from conventional retailers at home and the loss of tax revenues, the government is now considering revising the legal gap.
"If you do not disregard the rules of the family to commercial imports and cross-border e-commerce, there is an advantage that you give yourself to companies abroad," said Chan Wai-Chan, a retail partner at the firm Oliver Wyman in Hong Kong. Companies that have invested in a brick and mortar presence in China appear to be usurped by companies that have not incurred the same set-up costs, he said.
WallMart Cosco in China
Wal-Mart Stores Inc., Costco Wholesale Corp., Aldi Stores Ltd. and Body Shop International Plc are among the companies that share the $ 60 billion sales that make up the alternative chain and their merchandise, are not compliant for sales needs in China stores - can be delivered between customs warehouses in areas designated to consumers as fast as one day.
Cross-border e-commerce can triple to 15 percent of the total e-commerce market within five years if not constrained by the new regulations, said Xia Chenan, an Internet and digital analysis of practice at McKinsey & Co . in Shanghai. The cross-border chain is expected to increase by 43 percent in 2018, with products valued at 758 billion yuan, according to McKinsey and iResearch. The entire electronic commerce market reach 6.5 billion yuan in 2018. The company is so popular that new Chinese words to emit to describe it: "haitao", that is to say buy objects imported from online sites, and "daigou", which means that the " buyer is physically located in a foreign country to purchase the items in your name.
While the large gray market was formalized in early 2015 by Chinese leaders as a means of boosting domestic consumption, there is now a powerful consumer environment - as well as online retail giants like Alibaba Group Holding Ltd. and JD .com Inc. - behind. And this can create difficulties for the government car it seeks to "clarify" the rules by next.
Cross-border online sales help foreign brands skirt approvals Market may triple if regulations don’t curb sales: McKinsey
Online Retail in China
"They opened a gap and everyone started working," said Chan of Oliver Wyman. "They removed the genie from the bottle, and now they can not get back up." One reason for popularity is that it allows consumers to purchase foreign-made infant formulas, health supplements, and other products from safety and integrity categories Contest of the series of food scandals over the last decade. It is also given Chinese consumers a greater choice, and include the possibility of buying exotic products, such as chia seeds and acai berry.
The goods sold by the itinerary are also not subject to the multitude of taxes that are levied on the same object sold by the traditional channels in China, which effectively allows the marks of referee against themselves.
The government proposed three changes in April of last year: a marginal increase in taxes, limits on the volume of purchases to ensure that the transactions are intended for use personnel and a list of authorized or "positive" foreign products which are available online.
"It was growing faster, penetrating many different sectors and disrupting many businesses in China," said Matthew Crabbe, managing director of Mintel International Group Ltd. of the Asia-Pacific research.
"They do not want this to be a source of unfair competition for local retailers."
In categories such as health supplements and cosmetics, where domestic manufacturers have been protected against
Source : https://www.bloomberg.com/news/articles/2017-05-18/a-60-billion-e-commerce-loophole-in-china-may-be-narrowing
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