Cross-border e-commerce has also fallen in love with live streaming?

Unlike previous Double Elevens, this year's Double Eleven seems a bit "quiet", but the influence of major e-commerce platforms has not diminished at all. It is worth noting that cross-border e-commerce , which has played an important role in the Double Eleven activities over the years, has continued to gain popularity under the influence of the epidemic, attracting giants from all sides to join the market.

Since the beginning of this year, not only have traditional e-commerce platforms such as Alibaba, JD.com, and Pinduoduo been increasing their investment in cross-border e-commerce, but emerging live streaming platforms such as Douyin and Kuaishou are also rushing into the market. With more and more players in the industry, the atmosphere in the cross-border e-commerce field is becoming increasingly tense.

Is cross-border e-commerce popular again?

In recent years, with the improvement of people's living standards, cross-border e-commerce has begun to generate huge growth potential, and has increasingly developed into an indispensable driving engine for e-commerce platforms, demonstrating amazing explosive power. From the perspective of the industry, the rise of cross-border e-commerce platforms is inseparable from the support of multiple external factors such as policies and the epidemic.

First, international trade policies that are beneficial to cross-border e-commerce are constantly being introduced, providing a good policy environment for the development of cross-border e-commerce. Since last year, relevant national departments have successively issued notices to expand cross-border e-commerce pilot projects. Subsequently, new policies have been introduced in succession to facilitate customs clearance procedures, expand the scope of comprehensive demonstration zones, etc. These new policies have greatly promoted the development of cross-border e-commerce in my country.

Secondly, the epidemic has severely impacted the global supply chain, which has created historic opportunities for China's foreign trade exports, which has done a good job in epidemic prevention and control. Against the backdrop of the global fight against the epidemic, global consumer demand first experienced a wave of downward adjustments. Many factories went bankrupt due to lack of external orders, which led to a further decline in supply. As the epidemic spreads, production links that are more vulnerable to the epidemic have been further impacted, and supply shrinkage has further intensified, ultimately leading to an "imbalance" between demand and supply (high demand and insufficient supply). This has created a huge window of opportunity for China's foreign trade, which has achieved better prevention and control.

Finally, the increasing maturity of domestic cross-border e-commerce has also laid a good foundation for Chinese traders to go overseas. According to Chinese customs data, as of 2020, the number of import and export lists cleared through the customs cross-border e-commerce management platform reached 2.45 billion, and the total import and export value reached 1.7 trillion, more than 10 times that of 2015.

In the import and export e-commerce, Taobao platform (Tmall Global + NetEase Kaola) occupies an absolute leading position with a market share of 52.1%. At the same time, B2B platforms such as Alibaba International Station and Dunhuang.com have built complete online trading platforms for export companies, which have laid a good foundation for the development of China's cross-border e-commerce. Especially when international trade disputes are becoming increasingly prominent, many export companies can reduce their dependence on international e-commerce platforms to the greatest extent possible and avoid the expansion of economic losses caused by trade disputes (such as Amazon's store closures).

Take the live streaming e-commerce express train

From the current perspective, the resurgence of cross-border e-commerce is closely related to the development of new channels such as e-commerce live streaming. In recent years, with the maturity of the domestic live streaming sales model, TikTok, the overseas version of Douyin, has also followed the domestic example and launched its own TikTokShop, which is the overseas version of Douyin Store. It has also opened TikTok Shop Seller University and allowed sellers to ship their products through third-party platforms such as Amazon, gradually establishing a complete online e-commerce closed loop.

Having been verified in the domestic market, this development model was soon imitated by overseas platforms such as Amazon, AliExpress, and Lazada. From the current perspective, cross-border e-commerce companies are embracing live streaming e-commerce, and there is an internal logic behind this.

First, users’ consumption habits have changed. A 2020 McKinsey report found that after the outbreak of the COVID-19 pandemic, 76% of consumers in the United States quickly abandoned their pre-pandemic shopping habits and gradually paid more attention to social media platforms, giving rise to a new form of e-commerce retail based on live streaming. According to an analysis by e-commerce platform Shopify, during the peak of the pandemic, younger shoppers were more likely to shop through social media channels than older people, which is also an important reason for the formation of live streaming e-commerce.

Second, the huge live broadcast traffic has laid a good user base for the live broadcast platform to develop e-commerce business. Whether it is TikTok, which has 1 billion monthly active traffic, or Lazada and Shopee, the largest e-commerce platforms in Southeast Asia, or Shopify, the leader in the North American e-commerce market, they all have considerable market influence and a huge user base in their respective markets, which creates the possibility for them to carry out live streaming sales.

Third, the blocking policies of large platforms have accelerated the rise of independent sites. In May of this year, Amazon experienced a large-scale account blocking wave. A large number of sellers had difficulty operating due to the blocking. Some sellers chose to leave to stop the bleeding, and the remaining sellers also began to deploy on other platforms. At the same time, the popularity of shein, a fashion brand, has prompted independent sites with shein as a benchmark to become increasingly favored by capital and obtain financing. These favorable external factors have, to a certain extent, accelerated the pace of Internet platforms entering cross-border e-commerce.

Three major issues

However, although there are many bright spots at present, there are still many problems facing cross-border e-commerce going overseas.

First of all, due to the influence of many factors such as overseas religious culture, social customs, consumption habits, and politics, there are challenges in the localized operation of cross-border e-commerce. For cross-border e-commerce, to expand overseas markets it is necessary to have a deep understanding of local customs and national conditions. From the current perspective, whether it is Alibaba, which has a certain foundation overseas, or TikTok, which already has considerable overseas operating experience, there are some challenges in their localized operations.

For example, Lazada, the largest e-commerce platform in Southeast Asia, which was acquired by Alibaba at a high price, once lagged behind the up-and-coming e-commerce platform Shopee after the acquisition. Industry insiders believe that its lag may be due to the Chinese management team's failure to adapt well to local operations, resulting in the failure of some strategies. Although TikTok has achieved global expansion thanks to its excellent localized operations, it was also removed from the Indian government and banned due to geopolitical factors, causing its influence in the market to decline sharply.

Secondly, due to the vast land and sparse population overseas, the overseas supply chain faces the problem of balancing efficiency and cost. Unlike the domestic environment, overseas markets are mostly vast and sparsely populated, and it is difficult to copy the domestic development model for their logistics and transportation. For example, in Russia, it often takes many days to deliver express or take-out food by truck, and it is impossible to achieve 24-hour delivery like in China.

In order to ensure delivery speed and quality, developed markets such as Europe and the United States currently mostly use air transportation. E-commerce platforms such as Amazon have established their own air transport fleets to ensure logistics timeliness, but this will undoubtedly increase the cost of the supply chain. Excessively high supply chain costs make it difficult to implement this development model in countries and regions such as Russia and Eastern Europe.

Finally, there is the challenge of payment security. The current overseas payment market is basically occupied by internationally renowned giants such as PayPal, while new entrants such as Alipay have relatively limited influence overseas. In addition, as countries pay more and more attention to data security issues and data supervision becomes stricter, the uncertainty factors in cross-border payments are increasing year by year.

A protracted war is inevitable

From the perspective of promoting the "dual circulation" of the national economy, cross-border e-commerce, which has the function of connecting the inside and the outside, will have great potential in the future. However, judging from the many situations encountered by cross-border e-commerce overseas, it will still require sustained efforts if it wants to take root overseas.

On the one hand, competition in overseas markets remains fierce. Currently in the Southeast Asian market, there are not only local e-commerce leaders such as Shopee and Lazada, but also international retail giants such as Walmart, eBay, and Amazon have also intervened; in the South Asian market, Flipkart under Walmart, Amazon, and JioMart under Reliance Industries are all strong local competitors; in emerging e-commerce markets such as Africa and the Middle East, many e-commerce platforms such as Shein and noon have also emerged.

In short, whether it is dealing with the powerful Amazon and Walmart, or the numerous local e-commerce unicorns, domestic cross-border e-commerce giants need to make long-term preparations if they want to take root locally.

On the other hand, building overseas supply chains takes time. Compared with domestic e-commerce, cross-border e-commerce has higher requirements for the logistics system of platform service providers. It must not only meet the users' requirements for timely returns and exchanges, but also take into account costs while improving logistics efficiency. To achieve this, platform service providers cannot do it without years of cross-border experience and strong technical capabilities.

In general, whether it is coping with overseas competition or building an overseas supply chain, it is not something that can be achieved overnight. For Chinese companies that are interested in expanding overseas e-commerce markets, they must be prepared for a protracted war if they want to go overseas and do cross-border business.