Jason Zhang: Foreign VMS Brands in Cross-Border E-Commerce 2.0

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Written by: Fiona Xu

Edited by:Anna HU (WeChat ID: Nana-annahu), Hailee Bu, Olivia Huang, Hestia Zhang

Jason Zhang, Managing Director of Asia Pacific & Greater China, Atrium Innovations

Jason Zhang, Managing Director of Asia Pacific & Greater China of Atrium Innovations, discussed with us the current situation of cross-border e-commerce and how to seize more opportunities in the future.

Cross-borderE-commercedoes not mean a mere extension of common trade. E-Commerce, but rather a transform of trade pattern and consumption pattern under the background of globalization, a reform of business model based on consumption upgrade. Thanks to the development of cross-border E-commerce, today’s Chinese consumers, especially the 200 million emerging middle-class consumers, are for the first time able to enjoy the safest and state-of-the-art goods and services.

Jason holds the opinion thatcross-border E-commerce has a profound impact on the macro-level and may continue to influence world trade, tax revenue and foreign exchange management. Competition, goods, retail and capital are four keys to its development.

Competition

Today, the domestic pattern of E-commerce has been settled. Tmall and JD share 70% to 80% of the market, while all the other players are striving to survive in the narrow space. If cross-border E-commerce wants to share the cake, they can only improve their core competitiveness by choosing, discovering and promoting new products.

Goods

Behind the rise of cross-border E-commerce lies the consumption upgrade in China. Chinese consumers now ask for the same goods and services as the middle-class in developed countries. In the past, international brands would export third-rate goods to developing countries including China. Now this strategy has gone out of time. Introducing obsolete goods to China has no future at all.

Retail

In recent years, an increasing number of global retail giants are entering the Chinese market through cross-border E-commerce. Unlike the old offline-to-online model, they are now developing in the opposite way. While brand marketers can open stores and sell goods on various platforms, global retail giants are usually bound on one platform. Jason believes that the upcoming challenge lies in the communication and competition with global retail giants.

Capital

Now that China has become the largest investor ofMerger inVMS industry, even dairy and medicine companies intend to squeeze into this market. Capital can help domestic enterprises realize industry upgrade, thus improve technology. Chinese enterprises that hope to seize this chance need to integrate capital resources in a cross-border way.

How can cross-border E-commerce be the next king of VMS?

On March 17th this year, spokesman for the Ministry of Commerce issued a statement on the supervision for cross-border electricity supplier after the transition of retail imports.Cross-border purchasing was defined for the first time on the policy level: personal items. This is a positive affirmation on cross-border E-commerce from the Ministry of Commerce and marks the prelude of a booming 2.0 era. Cross-border E-commerce has three popular categories – cosmetics, VMS as well as maternal and child products – in which VMS is the only one that has both reasonable profit rates and long-term developing potentials, with advantageous information resources, policy and macro-environment. On the other hand, fierce competition is inevitable under such good circumstances, because all rivals enjoy the same policy.

Even though faced with such a pattern and challenges, Jason still believes that foreign brands that have just enter the Chinese market still have two big opportunities – channels and categories.

In terms of channel, the ChineseVMSmarket still lags behind that of developed countries. In China, direct selling has about 50% market share, while off-line and physical entity 20% and E-commerce only 20%. In America, however, direct selling and E-commerce make up less than 30% of the market. Its largest channels are professional VMS and food retail stores. For cross-border E-commerce, opportunities only come from appropriate analysis, upgrade and transform of future VMS channels.

Category is a major problem of the whole VMSindustry. While VMS products are usually sold in single items in China, they can be classified into a dozen categories in other countries. In the future, VMS products are bound to have more detailed categories. Cross-border E-commerce should expand their categorization to Chinese product line, improve service and offer more comprehensive choices.

In the end, Jason pointed out that the core problem of the industry now should go back to the product itself. Plenty of foreign brands who have just come to China tend to overestimate their brand influence and underestimate Chinese consumers’ criteria. But only when they show sincerity and respect to the Chinese market, provide Chinese consumers with the best goods and service, can there be a long-term policy for their market penetration.