Amazon says hello to haitao Amazon wants to deliver more

international products to China's voracious e-commerce market, Linda Deng reports from Seattle.

Chinese consumers love to haitao, and Amazon.com is looking to feed that need.

Haitao is the Chinese word for consumers shopping overseas or paying for third parties to buy products and ship them to China.

"We expect our sales in China to be doubled or tripled in the next two years," said Amy Reitsma, national accounts sales manager at Manhattan Toy, a US toy manufacturer and owner in Minneapolis, Minnesota, who uses Amazon's cross-border ecommerce platform - Amazon Global Store at Amazon.cn - to reach the emerging market.

Cross-border e-commerce accounted for 14.8 percent of China's total foreign trade by volume in 2014, according to iResearch, which forecasts annual growth for China's market at 26 percent a year until 2017.

According to a Nielsen survey, there were 18 million Chinese crossborder shoppers in 2013 on foreign sites, a 31 percent increase from 2008. The number of shoppers is expected to double in 2018, according to data from the China E-commerce Research Center.

Analysys.cn data show cross-border online shopping in China rose from 80 billion yuan ($12.9 billion) in 2013 to 129 billion yuan ($20.8 billion) in 2014.

During a November 2014 Black Friday promotion in the United States, Chinese consumers' overseas payments via Alipay tripled from a year earlier. Alipay, China's top third-party payment platform, is a unit of Alibaba Group Holdings Ltd.

The increase is attributable to the rising purchasing power of more sophisticated Chinese consumers, who care not only about price but also want authentic Western products. That desire is stronger when the product is not available in China, despite taxes and shipping costs.

That demand coincides with the government's increasing emphasis on consumption and its measures to encourage e-commerce. Also, the Free Trade Zone (FTZ) concept makes importing easier and less costly for foreign businesses.

At the State Council executive meeting on April 28, Chinese Premier Li Keqiang called for improved import-export policies to offer more choices for the domestic market.

On July 4, China unveiled its action plan for "Internet Plus", a concept first presented by Li in March, when he delivered the government work report with the goal of fueling economic growth.

Internet Plus looks to integrate the web with sectors such as modern manufacturing, agriculture, energy, finance, public services, logistics and e-commerce.

The government will provide finance and tax support to key projects related to Internet Plus and encourage local governments to follow suit while welcoming investors at home and abroad. China wants to clear barriers and lower limits for the market entry of Internet Plusrelated products, optimize the credit system, draft a big-data strategy and promote legal services.

The Free Trade Zone in Shanghai, which will soon be extended to other cities, offers favorable tax rates and gives foreign companies more control over their companies based in the zones.

In January, the Chinese government announced a policy allowing foreign companies to operate their own online marketplaces in China. The Chinese Ministry of Commerce issued a draft policy stating that foreign companies can wholly own "online data process and e-business transaction" enterprises.

The market potential has encouraged US e-commerce platforms and brands.

"We have been approached by many distributors and retailers," Reitsma said. "We participated in manufacturers' trade shows. So we knew that the market was there. It is just the matter of finding the right partners to work with and the right products to move forward."

Having partnered with Amazon since 1998 and now selling more than 450 products through the Seattle-based company, Manhattan Toy started to work exclusively with Amazon China two years ago.

Last year on Nov 11, a day also known as "Double 11", celebrated by young people shopping online, Amazon China announced the official launch of the Amazon Global Store its first "Black Friday Overseas Shopping Festival" for Chinese shoppers, allowing Amazon China customers to browse the stock of the US Amazon store from an all-Chinese user interface.

Since November, the month of the first order from China, Manhattan Toy has seen increasing business from China.

"We have recognized that Chinese consumers had surging demand for overseas high-quality products," said Stacy Colasurdo, director of the Amazon Global Store. "As a result, we rolled out the Amazon Global Store (AGS) in China last November. AGS on Amazon.cn is the first Amazon Global Store residing on a local website and with localized shopping experience globally."

Goods in high demand

Fashion, beauty and baby products, and toys and technology products are in high demand. Among the top-selling products in the Global Store are baby bottles, of which 140,000 made by Comotomo Baby Bottle were sold.

Cross-border e-commerce allows foreign brands to enjoy the sprawling Chinese market without having an actual presence in China. Compared with traditional e-commerce or retail, there are fewer barriers to China entry. With lower duties, no value-added tax and supervision by Chinese customs agents, the process is transparent and also helps prevent counterfeit items.

Chinese e-commerce giant Alibaba also saw the opportunities and wants to attract international brands and vendors to sell through its platforms. Alibaba co-founder and Executive Chairman Jack Ma visited the US in June to encourage US small businesses to join Alibaba in order to reach China's ravenous consumer market.

"My purpose coming here is we need more American products in China," Ma wrote in a June 8 op-ed for The Wall Street Journal. "We have a hungry 100 million people coming to buy every day. We did not come here to compete. We came here to bring small business."

In February 2014, Alibaba started Tmall Global, a site designed to give Chinese online shoppers a platform to buy foreign-branded products directly with the pitch: "100 percent foreign original authentic, 100 percent foreign merchants, 100 percent domestic return".

John Spelich, Alibaba vice-president of international e-commerce business, told The Wall Street Journal that Alibaba was introducing shipping centers in the US to handle packaging, levies and other import fees for US retailers and meeting with US brands to get them to accept Alipay, a Pay Pal-like service that processed about $150 billion in mobile transactions last year.

Wu Qian, general manager of Alibaba's cross-border B2C (business-to-customer) department, told China Daily in June that "Tmall Global plans to develop the emerging cross-border e-commerce mode into a mainstream purchasing habit of Chinese people in the next five years".

On April 15, JD.com Inc, China's No 2 e-commerce player, launched its JD Worldwide cross-border online shopping platform. JD.com, in partnership with eBay Inc, started a program to allow Chinese shoppers to buy goods from eBay sellers in the US.

Supported by Amazon's global vendor network, Amazon's "Direct Import" in China offers more than 30,000 foreign products in 13 categories. The top five brands preferred by Chinese customers are S. Oliver, Fly London, Dogeared, Kirkland Signature and Unisa.

AGS, launched in November, offers 32,000 brands and more than 3 million products in 32 categories.

"In the last five or six years, Chinese consumers became very sophisticated, meaning that they are much more conscious about quality of products, the difference between fake and genuine, more and more like consumers in Europe in terms of sophistication," said Diego Piacentini, senior vice-president of Amazon International.

Piacentini said that the categories and products are selected using data mining about Chinese shoppers.

According to Amazon sales data, over the past six months, the top five categories favored by Chinese customers are shoes and apparel, and kitchen, outdoors and baby products. The top 10 brands preferred by Chinese customers are Clark's, Calvin Klein, Crocs, Thermos, Comotomo, Skechers, Tommy Hilfiger, Nautica, Calvin Klein Jeans and Emporio Armani.

Cross-border e-commerce

Last August, Amazon launched a Free Trade Zone cross-border initiative, an add-on to its existing two major components of its crossborder strategy in China: Amazon China's AGS on Amazon.cn and Direct Import.

Amazon enjoys an advantage on cross-border e-commerce in China, as it is a global company running different online platforms in different countries. It has established a network of 109 fulfillment centers worldwide in 185 nations and regions. Thirteen of the centers are located in China. Amazon guarantees same-day delivery to 1,400 Chinese cities, and its delivery service reaches nearly 3,000 cities and counties in China.

"One thing we know is that Chinese customers really care about quality products for their children," Piacentini said.

US sellers and vendors, especially those who have had success on Amazon's US website, are excited about the services offered by Amazon's global sites, including marketing and logistics help.

"But the vendors want to know the mechanics, the branding and the difference between selling on Amazon.com and Z.cn," said Susan Saideman, vice-president of Amazon's global vendor management team. "Data tracking the consumption pattern of the Chinese customer at Amazon.com help us identify the most frequently searched products and brands. The local Chinese team... then will confirm the list with their local experiences and unique insights."

Saideman has traveled to China seven times in the past two years. "We know we should work differently with China to be successful in China," she said. "We brought several hundred brands and 30,000 individual products, including the Dyson purifier, Graco strollers, Melissa& Doug toys, Newell Rubbermaid whose sales doubled and many other products."

"The Amazon platform is easier to work with, and it costs less," said Reitsma, of Manhattan Toy. "Also, we could see the customer reviews at Amazon China, learning more about customer needs and their feedback."

Manhattan Toy today has thousands of products in the Amazon Global Store and about 100 products available through the Direct Import program.

Reitsma knows of Alibaba, but is not familiar with or trusting of its cross-border platforms.

"To most of us, Alibaba is known for the biggest IPO launch in US history, but not known as e-commerce platforms for manufacturers in the US," she said. (The purpose of Ma's trip last month was to change that perception.)

iOttie Inc is another small company that has found success partnering with Amazon. Founded in 2010 in New Jersey with only four employees, the car-accessories company now has 30 employees and an R&D team.

iOttie started small as a reseller on Amazon, selling a few products. Its biggest success was a mobile car mount that made its way up to a best-seller position. After several successful products, they were invited to become a vendor for Amazon.

"After we became the vendor of Amazon rather than third-party seller on Amazon, we were able to work closely with Amazon's retail and marketing teams." said Eric Kang, director of marketing and communications at iOttie. "We are very excited about entering the Chinese market with Amazon China, and want to spend our first six to 12 months introducing who we are. From there, we want to strengthen our marketing and continue to build our brand."

Sales revenue at Amazon China's overseas store rose 24 times during last year's Black Friday (the day after Thanksgiving) compared with its launch date. It tripled from January to April this year.

On June 24, the US Embassy Commercial Service and Amazon China announced that they will establish a strategic partnership to promote the development of Sino-US trade, in particular getting more US small-business goods to Chinese consumers.

Amazon and the US Department of Commerce International Trade Administration (ITA) signed a global framework agreement under which small and medium enterprises will be helped on developing export strategies. China is the first country to land this agreement.

"China's economy is experiencing the traditional export-driven model to the domestic demand of consumer-driven paradigm shift for American enterprises, which represents a good market opportunity," said US Embassy Minister Counselor and Consul General Chuck Bennett.

"The haitao market started to rise from the end of last year, and it is still a blue sea (wide open) market," said Wang Xiaoxin of Analysys Enfodesk, a Beijing internet consultancy. "Thus there is no titan player. Global e-commerce giant for sophisticated consumers is a mixed blessing for Amazon."

Contact the writer at lindadeng@chinadailyusa.com