5 things we learned about the Japan - China C2C e-commerce market as we go into 2019

On 14 March 2019, SF Express Japan began a soft launch cooperation with Japan’s most famous grocery department store - Don Quijote, in the shop which lies at the epicenter of Chinese shopping in Japan: Dotonbori Osaka. Although early days, here are the top 5 things we have learnt about the rapidly changing C-C e-commerce marketplace in Japan: 

1- Footfall from Chinese tourists and professional 'Daigoh' shoppers in Japan has remained strong in Osaka during 2019. From January 1, 2019, daigoh (Buying on behalf of others) merchants are obligated to register and pay taxes. The new law compels daigoh merchants to obtain licenses and formally register as businesses. Otherwise, they will be subject to fines as high as RMB 2 million (US$291,620) for illegal business and tax evasion. This restriction has driven tourist shoppers and Daigoh's to search for legitimate 'white channel' distribution channels between Japan and China. First amongst these, is SF Express Japan.

2- Providing a legitimate 'white channel' shipping method is in growing demand. SF Express is famous for only providing white channel shipping for EC products between Japan and China. Our brand name is precious to us, and this means that customers do have to pay the required VAT and/or Import duty inline with the law. But it also means these products are safe. They will be received by the customer within a reasonable transit time. One trading company source recently told me that since these restrictions came into effect, up to 1/3 of their shipments not sent in the clear 'white channel method' were being rejected and returned by China customs. So these restrictions are working, and customers need a trusted 'white channel' option.

3- It's a good time for SF Express in Japan. Before even opening the counter in Don Quijote, we started to receive bookings from customers keen to ship product through SF Express. The SF brand name is based on quality, honesty and reliability within China - and this is a big deal for customers who are proud to see a brand they trust also growing in Japan. The implications of SF Express' ability to pull footfall into department stores is only now being fully understood. We may not cause the customer to come into the shop (not yet) but we do make the customer happy that they have a trusted partner with them to ship their products back to China.

4- Technology is key to the customer experience. Investment in our home-grown scan and pack product database and technology has been essential for reducing the time a customer spends at check-out from half an hour, to just a few minutes or less. We have developed a product database of over 30,000 items / SKU's which allows us to instantly calculate the most cost efficient 'white' shipping channel for the customer, along with printing the commercial invoice and air waybill needed to send their shopping overseas. Further integration planned with We-Chat and Ali-pay will further improve our efficiency and the convenience for the shopper.

5- B2C exports will increase, but further B2C simplification is needed. In late November 2018, the Chinese State Council released new policies promoting cross-border e-commerce, which came into effect on January 1, 2019. According to the policies, China’s Ministry of Finance will add 63 categories of products to the list of goods that are duty-free when purchased via cross-border e-commerce platforms, including popular consumer goods like electronics, small home appliances, food, and healthcare products. With the new policy, the list of duty-free cross-border e-commerce products covers 1,321 items in total.

Further, the tax-free quota on single transactions will increase by 150 percent from RMB 2,000 (US$291.62) to RMB 5,000 (US$729.05). Consumers buying high-value products shall benefit more from the higher single transaction limit.

China will also loosen the annual quota of individual consumers on cross-border e-commerce to RMB 26,000 (US$3,791.06), up from RMB 20,000 (US$2,916.20) previously. The ministry will increase the annual quota as income grows in the future.

Additionally, China will extend cross-border e-commerce pilot zones to 22 more cities, including Beijing, Nanjing, and Shenyang, bringing the total to 35 cities. Cross-border e-commerce companies enjoy easier customs procedures and supportive policies in these zones.

However, considering the high demand for a broad range of Japanese products in China- typically up to 30,000 different types e-commerce product. The IT requirement to pre-register and provide data in advance in order to benefit from these savings requires some investment which today only larger EC platforms can bear.

Over the coming months SF Express Japan will be working with partners to leverage our growing C-C retail platforms to develop simplified B2C shipping solutions that allows individual tourists and shippers, as well as small Japanese EC platforms, the ability to obtain the full range of tax benefits that these changes are bringing but without the need for heavy IT investment and integration. Watch this space.

SFT Tokyo 24th March 2019