In the run-up to Christmas, Tao Xin and his team of 200 salespeople in the eastern Chinese city of Yiwu work long hours dispatching the make-up and accessories they sell on Amazon and US ecommerce site Wish. 

“Our busiest time is between Black Friday and Christmas,” said Mr Tao. “We might receive five times more than our normal level of orders.” 

With 80,000 shops covering an area the size of more than 750 football pitches, Yiwu’s International Trade City has for years attracted foreign retailers stocking their stores for Christmas.

Now tens of thousands of local vendors receive orders directly from customers online and post the products to them, bypassing overseas retailers entirely. Mr Tao says his team sells products worth up to $3m a month, with an average order worth $10.

Local traders expect strong 2019 sales despite the US-China trade war , which has seen additional tariffs on most Chinese exports, a promise by US President Donald Trump to exit a postal treaty that benefits Chinese exporters, and growing EU pressure on platforms such as Amazon to crack down on tax evasion by online vendors.

Cross-border ecommerce sales are growing at an annual rate of 30 per cent and will reach $175bn this year, accounting for about 10 per cent of online consumer retail globally, according to consultancy Euromonitor.

With a huge consumer manufacturing base and export infrastructure, China has emerged as the dominant provider of goods in this trade, with total cross-border ecommerce exports worth more than $130bn last year, according to the China E-business Research Center, a think-tank.

On Amazon marketplaces in Europe, 39 per cent of top sellers are based in China, according to consultancy Marketplace Pulse, which estimates the proportion to be even higher on Amazon’s US site.

Beijing has supported the sector, this year granting Yiwu and about 20 other cities exemption from VAT on cross-border ecommerce exports. The city’s exports of products sold online are on track to reach Rmb30bn ($4.3bn) this year, according to official statistics. 

Businesses in Yiwu had registered 36,000 accounts on Alibaba’s international platform AliExpress, 35,000 on eBay, 12,000 on Wish and 10,000 on Amazon as of the end of last year, according to officials. 

Internet companies such as Amazon and Alibaba have provided Chinese vendors with training in setting up and running stores, extended credit lines to finance sales and allowed merchants to use their overseas logistics services for rapid delivery. 

“Amazon’s department in China helps us. It has the best support for merchants in terms of number and service,” said Mr Tao. In turn, the vendors pay for their goods to be promoted in searches on Amazon’s website. 

Mr Tao, who said the bulk of his customers were in the US, said he was “very worried” by Mr Trump’s threat to withdraw from the Universal Postal Union, a multilateral agreement that allowed vendors in Yiwu to send packages to the US more cheaply than to customers within China.

But he is upbeat. “The change will not be sudden, so we try to adjust,” he said. For example, he plans to sell more products in emerging markets such as Russia, where China accounted for 91 per cent of international parcel deliveries last year.

While about 80 per cent of Chinese vendors are intermediaries who buy from factories rather than making their own products, the trend is towards direct sales by Chinese manufacturers, said Zhu Yuelai, a manager at Yiwu Wenxuan Outdoor Products. 

Mr Zhu’s company stores furniture in warehouses in the US, where goods are shipped as soon as orders are placed online. Those exports have been hit by US tariffs this year — but Mr Zhu said his company had found a solution. 

“Our route to the United States has changed. I used to enter the United States directly from China. Now I am first in Mexico or Canada, or go to Hong Kong to turn the product into one ‘Made in HK’, and then send it to the United States,” he added. 

Kingston Logistics in Yiwu has set up warehouses in the US for use by local apparel and small electronics exporters. Manager Cherry Zhang said US consumers were absorbing the costs of tariffs, as there were few alternative countries for sourcing such goods.

“We discovered that because this tariff is for all goods imported from China, everyone will increase the tax, and the selling price will be raised. So it doesn't matter.” 

Source: Financial Times
 

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