China market is promising. Cross-border commerce can be seen as a relay of growth for brands and businesses outside of China to start entering the Chinese market while minimizing the risk. WeChat which is the primary customer engagement hub in China offers the structure to support this strategy. That’s why WeChat cross-border commerce can be an opportunity for brands outside of China, leveraging WeChat cross-border payment.
This is a chapter we focus on providing you with the foundations of a WeChat cross-border commerce strategy from a platform perspective.
After building the channel to host/sell products, a China-based agency can work in complementary to the platform operator to promote products and services and find an audience.
1. Introduction to WeChat cross-border commerce and China cross-border framework
A bit of context: there are 3 mains touchpoints to sell to Chinese consumers in the ecosystem of the cross-border trade:
- Overseas retails outlets for Chinese living or travelling abroad or Daigou agents
- China-based retails outlets through wholesalers/importers/distributors
- Cross-border commerce
In this chapter, we focus on the latest category of trade and more especially the channels integrated to the WeChat ecosystem.
There are other sales options for cross-border eCommerce which are detailed in the market overview section.
All these sales channels can works in synergy.
What is WeChat cross-border commerce?
China cross-border e-commerce (B2C) is the process to sell products to the Chinese market shipped from abroad without having to register a Chinese company or apply for local product licenses.
China-based customers can purchase products from Japan, Germany, Korea, France, U.S, etc…
WeChat focus means that the online commerce platform exists within WeChat.
Benefits of China cross-border
Chinese consumers make cross-border purchases because of the product quality, the quality-price ratio, the uniqueness, the guaranteed authenticity.
Cross-border eCommerce allows foreign brands to enter China in a cost-effective manner. It requires less capital investment and less inventory risk.
Brands can avoid the hassles of exporting to China and registering product under traditional trade regulation. It does not require lengthy product testing or registration processes.
- Sell products and services to test them (validate product traction)
- Understand how products might be received
- Assess what products works best
- Test a new product line available in markets outside of China
- See how the market works (where demand comes from, etc…)
- Understand competitors in China
- Build your brand awareness in China
These use cases are suitable for smaller brands and retailers.
Depending on the results against these business objectives, merchants should be better informed whether to expand further or not.
How the cross-border e-commerce works in China
Products sold directly to Chinese consumers from outside of China
It is based on specific import trading rules which are different from General Trade.
Importing process happens through fast customs product filing, customs clearance and lower import taxes.
|General Trade – Traditional Import trading
|Cross-border eCommerce trade
|Chinese local business
|Trademark and IP requirements
|Chinese local registration
|Chinese registration only
|Regulation / Policy
|Regarded as bulk goods with CRDA requirements
product registration and legal issues
|Regarded as personal articles with no CRDA requirements
|Tariff + GST + VAT
|(GST + VAT) x 70% (No tariff)
If you can’t legally sell your product in China thought the General Trade channels, the Cross-border eCommerce becomes the recommended options.
This eliminates the need for wholesalers or importers in the middle. And so there is less mark-up on an imported product sold to a Chinese consumer.
Warehousing for China cross-border
When defining the import strategy, the logistics plan goes along with the selection of the warehouse location from where the products are sent. Then the products can be shipped:
- individually directly to the buyer (direct shipping) => no warehouse needed
- in bulk to China to a bonded warehouse (in Hong-Kong or mainland China) from where the order is shipped to the buyer
Several options to store products before orders
|Overseas warehouse (EU/US)
|Banded warehouse in Hong-Kong
|Bonded warehouse in mainland China
|Shared with other countries
|Shared with other countries
|Committed to China
|N/A for a brand-owned warehouse
|**Logistics model / option**
Logistics of WeChat cross-border commerce
Logistics process via cross-border import
- Send the goods with cross-border logistics
- Store them in a warehouse in Mainland China or in Honk-Hong, except for direct shipping
- Clear China Customs with the end client’s information (ID, phone number and valid name)
- Deliver in Mainland China with domestics logistics and transportation
There are 2 options:
- Direct shipping
- Bonded zone model
|From Hong-Kong: 4-7 days
From Mainland China: 3-4 days
More details about direct shipping option
When shipping directly from aboard – the announced delivery time is about a week. But in reality, it takes more 2-3 weeks as products have to go through the logistics and admin processes.
More details about the bonded zone option
In the bonded zone model, the warehouse is located in a special bonded zone in Mainland China or in Hong Kong where you can store products as part of the cross-border trade.
These bonded zones are located in a Free Trade Zone (FTZ) which is a cross-border area where Chinese government tests economic reforms and new regulations, with the aim of:
- opening up the economy
- simplifying procedures in logistics, warehousing and customs clearance
These FTZ are meant to boost liberalization and facilitation for international trade.
The products stored in the FTZ are under the 3rd party logistics provider care with the following process:
- Ship goods from the origin country to a bonded warehouse at the FTZ
- Deliver the products from the FTZ
3rd party logistics provider
The logistics partner plays a pivotal role in the success of any WeChat shop. Terms and conditions must be negotiated and agreed upon with them.
3rd party logistics operator’s scope:
- pick & pack
- Added Value Services (VAS): relationship with customer service, shipping tracking
The applicable cross-border tax depends on how the goods are shipped. There are 2 types of tax, corresponding to the 2 logistics options.
- Personal import tax
- Cross-border import tax
In China, the preferential tax regulations are made to lower the price of the goods in order to spur cross-border commerce.
Depending on the logistics option, applicable tax is different:
|via direct postal clearance
|via bonded clearance
|If the parcel get checked
=> 15-60% postal tax
born by the customer or logistics operator (preferred option)
If the parcel DOES NOT get checked, you are lucky
=> No tax 🎉 🎉
GST: from 13% (depends on the product category)
=> 11.2% consolidated tax (25.5% for cosmetics)
|tax free if under 120 USD
Regarded as personal articles with no CRDA requirements
Category of products
Only products authorised to be traded via cross-border can use in the cross-broder ecosystem in China (WeChat & marketplace platforms).
The product categories which can be sold on a cross-border WeChat Mini Program is more limited compared to the permitted product categories which can be traded into China via cross-border.
List of permitted product categories which can be sold on a cross-border WeChat Mini Program
- Clothing / Shoes / Bags
- Cosmetics / Toiletries
- Jewelry / Accessories / Glasses / Clocks and watches
WeChat has a stricter set of rules in terms of product category available for cross-border.
- Clothing / Shoes / Bags
- Cosmetics / Toiletries
- Jewelry / Accessories / Glasses / Clocks and watches
- Home appliances / Digital products / Mobile phones
- Sports / Outdoor gears / Musical instruments
- Flowers / Gardening / Crafts
- Home furniture / Home decoration / Home textile
- Office / Stationery
- Sport training & online fitness
- Advertising / Design
- Public relations / Promotion
- General financial services
- Online tools (calendar, dictionary, etc.)
- Travel guide
- Visa services
- Restaurants comments & recommendations
- Restaurant queuing
- Meal ordering and delivery
- Photography/Enlarging print
- Wedding service
- Utility bill payment
- Delivery services
- Exhibition services
For WeChat, there is no F&B categories. So you can’t sell spirits (alcohol) on WeChall via cross-border even though it’s possible on Tmall Global.
Hence depending on the product category to sell through WeChat cross-border, the available solutions can be limited.
- 财经：跨境电商进一步稳外贸、促增长丨Cross-border e-commerce gains traction | April 2020 [China Daily]
- April 2020: China to set up 46 new integrated pilot zones for cross-border e-commerce to revive foreign trade
- New Pilot Cross-Border E-Commerce Zones | December 2019 [LegalTips]
Legal presence in China
Do you need to set up a mainland Chinese legal entity to sell through WeChat into China?
A few keyways
- Fapiao (local invoice) is a serious issue in China. Fapiao management is getting more and more stringent.
- Virtually all local businesses will have a WeChat presence.
Trademark and IP requirements
You should obtain a trademark registered in China for all your products before initiating any sales; even those via cross-border.
Trademark registration is a crucial aspect of opening a cross-border shop in WeChat.
2. How to sell on WeChat from outside of China
outside of China means no / limited presence in China.
We break down the different scenarios to start selling cross-border through a branded WeChat shop.
Our scenarios are based on:
- leveraging an existing and flexible WeChat store solution to support cross-border activity
- avoiding additional costs to develop a custom-made WeChat store from scratch
Here are the advantages ✅ and disadvantages ❌ of building a WeChat-based solution:
In our scenarios, the cross-border store is leveraging WeChat power, in order to build a direct relationship with their customers.
If other sales channels are considered like the marketplace platforms (Tmall Global / JD international):
- it requires extra investment which is quit high.
- the control and the flexibility with these 3rd parties channels are different.
- a cross-platform strategy should be put in place.
Also as these scenarios are using WeChat ecosystem, the cross-border payment option is WeChat cross-border payment (the ability to pay from within WeChat, with one click). This payment method doesn’t require you to have a Chinese bank account.
Eventually there is no scenario better than the other. It depends on the merchant parameters:
- China presence
- market priority / commitment to China market
- buyer persona
- product category
- number of SKUs
- retention rate
Scenario 1: build your owned channel with a local partner (who might not be specialized in cross-border)
Option aiming at accessing the maximum of what local entity can do with limited commitment
- Find a trustworthy local partner
- Sign up for WeChat Store Provider using the 3rd party local partner information (mainly the business license) in order to build a standalone eCommerce
- Create a cross-border Payment account
- Set up and configure the WeChat Shop
The WeChat store is operated directly by the brands/retailers. They manage everything in-house to build a WeChat sales channel.
You can access the features and the benefits of a WeChat Store as if you were locally registered. You can also apply for a WeChat Official Account to link it to your WeChat store.
If the local partner is not specialized in China cross-border commerce, the process could be less smooth (regulations, logistics, customs, tax, etc…)
Scenario 2: leverage a 3rd party cross-border solution to hit the market fast (with the support of a local WeChat Trader Partner)
Option aiming at unlocking Chinese eCommerce opportunity with a minimum commitment
There are local companies specialized in China cross-border commerce on WeChat called WeChat Trader Partners. They help you to build your presence on WeChat and generate sales on it with turnkey solutions which can be marketed in 2 models:
- a package to build a standalone WeChat shop – flagship store
- a marketplace program to have a shop in a WeChat-powered multi-brand platform
Process until you hit the market:
- Find a WeChat Trader Partner specialized in China cross-border commerce through WeChat
- They set up and configure the WeChat Shop.
Setup and configuration include:
- Shop creation, set-up and design
- WeChat Pay integration (cross-border payment provider:)
- Warehousing connection
- Foreign payment gateway
- Customer service and returns workflow
- Payements and settlements (workaround of setting up a WeChat cross-border payment account)
They operate the Chinese online shop (from set-up to management) on your behalf via a delegation contract.
- Support to source of 3rd party services (logistics, warehousing)
- Product category compliance
- Logistics and warehousing: manage logistics and support logistic needs (cross-border logistics, warehouse services, courier services)
- Online shop experience
- Platform maintenance
- Shop management: update store design / input product information – product management
- Customer service
- Returns management
- Loyalty program
- Reporting: regular operations report and analysis
- Content creation and design
The cost varies depending on the platform they are using:
- they have their own proprietary platform.
- they leverage an existing WeChat store solution.
The scenario helps to enjoy the power of domestic eCommerce platforms without the hassle of the admin processes, the platform maintenance and a China presence.
Scenario 3: Overseas WeChat Shop
Option aiming at getting started and testing the market
- Register a WeChat Official Account or Mini Program based in the origin country under your foreign entity name
- Create a cross-border Payment account
- Create, configure and design the WeChat Shop
An overseas entity can apply for cross-border eCommerce Mini Program / WeChat Official Account. All of the following documents need to be supplied at the same time:
- E-commerce platform qualification documents issued locally (notarized by a notary institution and certified by the local Chinese embassy)
- Entrustment agreement with domestic enterprises (the content of the clause must include liability authorization guarantee and promise to bear legal responsibility)
- Consumer protection mechanism or scheme (such as consumer risk notification letter)
However, there are limitations to check before registering for Overseas Mini APP:
- Available business categories to open an Overseas Mini Program Account
- Available business categories of product/service to apply for WeChat cross-border payment gateway as an OVERSEAS entity – there are limited categories of product/service that can apply for WeChat Pay.
- Video (like live-streaming) can’t be implemented into a MP as an OVERSEAS account.
So in most case, custom development is required to implement a 3rd party payment gateways to enable the cross-border payment.
Scenario 4: build your owned independent channel with your own Chinese entity
Option aiming at medium to long term plan for China market
- Set up a company in China – Incorporate WOFE
- Apply for a WeChat Official Account
- Apply for WeChat Pay
- Sign up for WeChat Store Provider to build a standalone eCommerce
The WeChat store is operated directly by the brand/retailer.
3. Other considerations when setting up a cross-border shop for China
In the previous section, we cover the different solutions that are integrated in the WeChat ecosystem. A standalone store or a third-party marketplace can be powered by different WeChat-based technologies:
- WeChat Mini Program
- WeChat H5
The other sales channels for cross-border eCommerce that are NOT integrated in the WeChat ecosystem are using:
- Native APP
- Web-based eCommerce
When targeting Chinese consumers, in order to match Chinese’s behaviour, it’s important that the technology is:
- with Chinese user experience
- integrated with Chinese payment systems (WeChat / Alipay)
WeChat cross border payment service
The payment is settled via WeChat cross-border payment. The end-customer pays in RMB via WeChat and the merchant received money in overseas currency.
WeChat cross-border payment service is a payment gateway to allow customers to use the Chinese currency to pay for goods or services sold by overseas merchants (both online and offline).
In order to use this service, overseas merchant opens a WeChat cross-border payment account that is link to the name of the foreign business (no need Chinese license).
WeChat cross-border payment charges around 2% on the cross-border transaction including the conversion to the foreign currency.
How to set up your account?
Register to WeChat cross-border payment account via:
- 3rd party cross-border payment provider (official local partners / WeChat agent / payment intermediaries)
- WeChat Pay Service Provider / 机构服务商 (native account)
The latest option takes (a lot of) time and the provided API is as good as the ones provided by the official local partners which are payment intermediaries, representative of Tencent.
So WeChat has local partners in various geographies to help WeChat to implement WeChat payment.
Their main service is to collect money on the behalf of the merchants which is then transfer to the merchant’s bank account.
Benefits of using these payment intermediaries:
- easier application process
- faster to create the cross-border payment account (about 2 weeks)
- lower cross-border payment charges (less than 2%)
Here is the exhaustive list of WeChat Pay partners per country.
Chinese customers pay in RMB.
WeChat Pay covers the following currencies: HKD, USD, GBP, JPY, CAD, AUD, EUR, NZD, KRW, THB, SGD, RUB, DKK, SEK, CHF and NOK. For unsupported currencies, trade can be made through the settlement of US dollars.
It settles each transaction with foreign vendors based on the price in local currency.
It purchases the foreign currency in T+1 day.
T+1 day settlement ensures a fast and safe payment transaction.
Non platform / technology expense
Beyond the cost related to the cross-border shop (set-up + operation), there are some non non platform / technology expense:
- WeChat Trader Partner fee
- Import duties
- Warehousing if needed
4. Cross-border platforms in China
Besides branded WeChat shop, retailers and brands outside of China have another option: marketplace platforms such as Tmall Global, Kaola, Haitun, VIP international, Xiaohongshu
Cross-border e-commerce is dominated by Alibaba and NetEase Kaola / 网易考拉.
The initial investment to set and use these sales channels can be quite high for overseas merchants that only aims at testing the product-market fit.
That’s why WeChat-powered platforms can be a relevant solution with a limited budget.
Idea for cost comparison (Platform / technology expense)
This cost estimate doesn’t include marketing/promotion budget.
The idea of budget: minimum investment of $30K+ per year (deposit + usage subscription + sales commissions + payment fees) for ‘Tmall Global’ marketplace (without marketing/promotion).
|3rd party cross-border B2C e-commerce platforms (TMALL, JD, VIP)
|WeChat based cross-border platform
|Based on the product category
150,000 – 300,000 RMB
|No deposit (except for some WeChat Trader Partner)
|Annual usage and technical service fees
30,000 – 60,000 RMB
|Annual usage fee from 10,000 – 26,000 RMB
|Based on the product category
|No sales commission
|Alipay = 1%
|WeChat cross-border payment charges = about 2%
5. Limitation of WeChat cross-border commerce
Only meet certain objectives (validate product traction in China with minimum risk)
Some product categories are not eligible for cross-border commerce.
6. Timeline and updates on WeChat cross-border commerce
|More details / Source
|China is opening to cross-border commerce import.
7. WeChat marketing activities to promote WeChat cross-border commerce initiative
Beyond building a robust platform, in parallel of setting up the cross-border shop, the marketing strategy is equally important. Here are some techniques to generate traffic to your WeChat shop.
- WeChat influencers
- WeChat display advertising
- Cross-promotion with other WeChat Official Accounts
- Content marketing
- Social sharing
- Driving traffic from other platform and social networks
WeChat is a relevant platform to reach Chinese customers because of its prevalence. But this platform is highly competitive because marketers are striving to catch users’ attention. So the marketing strategy come even more important.
We would recommend to choose local partners to help you on this in order to benefit their local expertise and network. China is a completely specific market. We won’t say it enough 🙂
If you think of some improvements or missing information…
Let’s build up the knowledge around WeChat cross-border commerce collectively !