Online shopping traditionally stops at the border. Amazon has localized sites for individual countries, while Alibaba’s Taobao and Tmall are largely limited to China.
But an increasing number of online shoppers are looking to buy items from overseas, according to Alan Tien, general manager of PayPal China. The company’s mainland business has seen crossborder transactions expand rapidly. Now, roughly 25% of PayPal’s global payment volume is crossborder, with greater China being a major contributor.
The road toward borderless e-commerce has its challenges. China’s small and medium-sized enterprises (SMEs) must first work to gain the trust of overseas buyers, find local partners and protect themselves against fraud. Tien spoke with China Economic Review about how PayPal has helped small companies tackle these difficulties and what foreign companies should expect from a coming wave of Chinese buyers.
What trends do you see in Chinese e-commerce and cross-border transactions?
E-commerce is exploding in China. It’s now the number two e-commerce market in the world. According to iResearch, it was worth RMB282.2 billion (US$44.53 billion) in the first quarter of 2012. With regards to our cross-border business, we are targeting the 5 million exportfocused SMEs in China, which represent a large percentage of the country’s total foreign trade. We’re trying to help these SMEs grow their business, which is right in line with China’s five-year plan to double the value of e-commerce.
What are some examples of a Chinese SME selling internationally?
One example is a man named Yang Chongchuang who started manufacturing chocolate fountains, the ones you find at buffets. He started with RMB500(US$78.90), created his own website and proceeded to add PayPal because he realized foreigners accepted it. Another example is a small online travel agency called chinatour.net. A couple of years ago they started accepting credit cards on their website but got hit by massive fraud attacks forcing them to shut down their international business. When they realized that many foreigners traveling to China are more willing to pay a premium than domestic travelers, they decided to try again, and this time with PayPal.
What are some challenges these export-focused customers face?
If an SME decides to sell directly to international consumers, it’s actually very difficult because you have to have a foreign website, you have to do internet marketing in a foreign country, you have to work with a logistics company that ships internationally and then figure out customs, taxes and duties. The challenges of a cross-border e-commerce business are probably 10 times that of a domestic e-commerce. We help our merchants get online and sell, whether it’s on eBay or on their own websites. We introduce them to marketing agencies and logistics companies. So even though PayPal is known as a payment company, in China we do what we call a one-stop solution where we’re packaging the various pieces needed to do e-commerce in one simple place. We don’t make any money unless there’s a transaction.