Is China the Target for Cross-Border EC? 3 reasons why food products are not suitable for EC

In the wake of the new coronavirus, more and more stay-at-home moms are shopping online for recreational items, and in January and February of 2021, U.S. e-commerce sales totaled $121 billion, a 34% increase over 2020. This is a 34% increase compared to 2020.

Medical drugs, cosmetics, food products, home appliances, and other items manufactured in Japan are attracting particular attention in China, and the system that makes these transactions possible is known as “cross-border EC. In this article, we will explain the future of cross-border EC for China, with an emphasis on food products.

Considering the Prospects of Food as a Cross-border EC Merchandise

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A wide variety of products are sold in cross-border e-commerce, but among these, sales of food products are not particularly high. Why is this?

In this section, we will explain in detail why food-related products are not suitable for cross-border EC.

We will focus mainly on the following three points.

  • Compatibility issues between food and EC
  • Convenience Perspective
  • Shipping cost issues

Let’s take a closer look starting below.

Compatibility issues between food and EC

Before touching on the compatibility issue between food and EC, let me give you one specific example. For example, in the case of an EC site for consumer electronics, as long as the model number is correct, the quality of the product will not be compromised regardless of which store you go to or who serves you.

Therefore, the consumer electronics industry and e-commerce sites are quite compatible, and in fact, the e-commerce rate for the consumer electronics industry is as high as 37.45%.

Compared to consumer electronics, so-called perishable foods, such as vegetables, meat, and fish, are not suitable for online shopping, where you cannot touch the products, because you can often confirm their freshness by actually seeing and touching them.

For the above reasons, many consumers visit physical stores to purchase products, such as fresh food, rather than shopping on e-commerce sites.

A survey conducted by JFC in January 2016 showed that one out of three consumers who purchased agricultural, forestry, and fishery products or their processed products sold online wanted sales businesses to provide information on producers and production areas when selling food products.

In addition, perishable foods need to be delivered to consumers as quickly as possible while maintaining their freshness, so it is necessary to assume that deliveries can be made under better conditions of freshness.

For this reason, it is of utmost importance to have a logistics base that specializes in food products.

However, due to funding and personal connections, only large companies are able to build logistics bases specializing in food products. The difficulty in building logistics bases is one of the reasons that obstruct the EC of food products.

On the other hand, with regard to specialty foods sold in local regions as luxury items, there are not a few consumers who purchase them on e-commerce sites because “I have had them before and they were delicious,” “I want to try them because they use good ingredients,” or “They are highly rated by word-of-mouth.

Convenience Perspective

First, consumers shop online for the convenience of e-commerce sites because they can shop online.

Amazon is a very good example of this, where you can purchase the products you want with a single tap, simply by including your credit card and shipping address information in advance.

However, in terms of food, most consumers can easily obtain fresh food without having to buy it on an e-commerce site by visiting a supermarket or convenience store within walking distance from their homes.

Considering the time it takes to complete delivery and the fact that you cannot actually hold the product in your hands to check its freshness, there is no advantage to going out of your way to buy food on an e-commerce site.

Shipping cost issues

Some services, such as Rakuten Ichiba’s “Asuraku” and Amazon Prime, offer free shipping when conditions are met, but in reality, shipping is not completely free; the online business bears the shipping costs.

However, Sagawa, Japan Post, and Yamato have raised the price of their delivery services, which has had a significant impact on EC businesses, and services that used to offer free delivery are now being discontinued one after another.

Against a backdrop of rising shipping costs, consumers are finding it more economical and convenient to buy large quantities of food at supermarkets, where they are not burdened with shipping costs.

Compared to brick-and-mortar stores, product sales on EC sites are inferior in terms of price competitiveness, making it difficult to increase the number of consumers using food EC.

However, this situation is slowly changing as the spread of the new coronavirus has increased the demand for online shopping.

When is it easy to handle food products in cross-border EC?

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What factors are particularly important when selling food products overseas? In food sales, PET-bottled beverages and alcoholic beverages are not so suitable for overseas sales in terms of weight and volume. In the case of cross-border EC selling food products, many cross-border EC businesses handle confectioneries that are light in weight and small in size, and other supplements.

Many snacks and supplements have a long shelf life and can be delivered at room temperature, so they are often used for cross-border EC shopping.

In terms of shelf life, dried noodles and dried fruits are also foods that are easy to handle.

The following four items are particularly important for selling food products in cross-border EC.

  • That the product is very light.
  • Small volume
  • Items with a long expiration date
  • Ease of temperature and freshness control.

Foods that meet the above four criteria are likely to be sold in cross-border e-commerce.

Is China the target for food EC?

Recently, cross-border EC for China has been expanding for food-related products in Japan.

The increased demand for online shopping due to the new coronavirus, the continued rapid increase in cross-border EC usage, and the deregulation of cross-border EC in China are some of the factors contributing to the rapid increase in cross-border EC usage to China.

According to the 2019 China report, “food and beverages” has established itself as the second largest category of products imported from Japan via cross-border EC at approximately 500 billion yen (31.1 billion yuan), with imports of powdered milk and perishable products in particular developing.

Deregulation of China’s cross-border EC

This section introduces what aspects of cross-border EC have been deregulated in China according to the following items.

  • Permit Procedures
  • About Tariffs
  • About Product Labels

Let us begin with a brief look at the following.

Permit Procedures

Part of the deregulation includes the shortening of permit procedures related to controlled goods such as food, vegetables, oil, fruit and milk products, meat, and marine products to 2-6 months only when using cross-border EC.

In addition, if a product is listed on what is called an import list published by the Chinese government, even if the product requires a permit for general trade, no import permit or registration is required for cross-border EC.

About Tariffs

Another aspect of deregulation is that tariffs are no longer imposed.

Commerce transactions through cross-border EC are now free of customs duties and goods can be delivered at a very low rate of 6.3%, including value-added tax.

About Product Labels

In normal general trade, for example, labels for goods need to be in accordance with the languages for the various countries in which the goods are sold.

However, due to deregulation in China, it is no longer necessary to attach product labels with Chinese descriptions for commercial transactions through cross-border EC, so only product barcodes are sufficient.

Cosmetics, home appliances, and clothing are well-known products for cross-border EC to China, but the above deregulation has created opportunities to expand business not only for these products, but also for Japanese agricultural products and other food products.

summary

In this issue, we introduced in detail the buying and selling of food products through cross-border EC and further explained the possibilities of cross-border EC for China. In order to sell food products through cross-border EC, it is important to select the right target market.

To do so, knowledge of the target country’s laws, products prohibited for import, matters requiring permits, tariffs, and other logistical matters is essential. Also, for the sake of business development, be sure to start cross-border EC with a solid system in place to deal with any problems.

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  2. No sales tax on cross-border EC product offerings? Explanation of the conditions for receiving a “consumption tax refund

  3. Why is cross-border EC so popular in China? Introducing popular products and malls

  4. An Opportunity for Japanese Companies? The cross-border EC market is expanding!

  5. Additional tariff rules for Taiwan cross-border e-commerce! What is “EZ WAY 易利委”?

  6. How to Enter the China Cross-Border EC Market? Five Secrets for Japanese Companies to Succeed