Do you want to sell your products in China, but do not have a Chinese business license? Is China a promising market for your business, but your company is not yet structured to register a Chinese company? Is this your first experience in China? Do you want to establish your presence and explore the local market while minimizing the risk?
WeChat Cross-Border e-commerce is a practical solution to overcome the bureaucratic challenges of selling in China. Many companies have found that selling cross-border on WeChat is an alternative gateway to generate revenue in China or prepare them for their full entry into the market.
What is WeChat Cross-Border Commerce?
WeChat cross-border e-commerce (B2C) is about selling products in the Chinese market by shipping them directly from abroad without registering a Chinese company or applying for local licenses.
This is possible because WeChat, offers an integrated e-commerce platform to sell directly from within the app and manage international payments.
The first step is to open a WeChat Official Account. Foreign companies can apply for a WeChat Official Account through a 3rd party agency or directly through an overseas business license. The pro and cons of both options and all the steps needed for your application are outlined in our guide, "How to Manage a WeChat Account."
Once your WeChat account is approved and active, the next step is building a WeChat Store. A WeChat Store is like an e-commerce shop but integrated into the app itself. Therefore, users can easily examine your products, place orders, and make payments directly from WeChat. Later in this article, we will discuss how to manage cross-borders payments on WeChat.
Benefits of Cross-Border E-commerce
Cross-border commerce is the easiest and fastest way to make your entry into the Chinese market.
First of all, opening a WeChat Store is an affordable investment for most companies without compromising your brand's image. You can use a local web design company with a good grasp of local culture to customize the look of your WeChat Store to fit your brand image and make it shine and resonate with the local market.
Moreover, on WeChat, you can post content that has the potential of reaching a huge audience. At the same time, you can use WeChat as an effective CRM tool to engage with your audience and enlarge your user base. Unlike other cross-border platforms like Tmall and JD, WeChat grants customers behavioral data that is critical to organizing their marketing campaigns. Therefore, WeChat cross-border e-commerce is a kind of one-stop solution for both marketing and selling purposes.
Not to be overlooked is the fact that Chinese consumers are prone to buy through cross-border e-commerce—one reason being the perception that foreign brands offer better quality products.
Many foreign businesses have leveraged these factors and used WeChat cross-border e-commerce to pave the way into the Chinese market or add an additional source of revenue to their business.
How Does The Cross-Border E-commerce Work In China? (Cross-Border E-commerce Trade vs. Traditional Trade)
There are several differences between traditional trade and cross-border e-commerce in China, which come as pros and cons for foreign businesses.
One of the main differences is that for cross-border e-commerce, you do not need to incorporate a local entity, which is a requirement if you want to sell directly in the domestic market. Therefore, when using cross-border e-commerce, you can avoid lengthy procedures to incorporate a local entity and obtain the necessary product authorizations.
When selling cross-border, you will pay a reduced import tax. However, the tax will be calculated on the retail price and not on the transfer price, and a maximum per order applies. Later on, we will discuss further details about cross-border tax.
The delivery of goods is where cross-border e-commerce suffers the most. If you ship directly from abroad, you cannot offer the best delivery time. For each shipment, you have to go through customs clearance, and it is not always predictable to know how much time this will take. Instead, companies in the traditional tread can establish a local logistics structure that offers the best delivery time.
An alternative to improve the delivery time, you can use a warehouse in a Free Trade Zone in China or in Hing Kong as we will now explain.
Logistics of WeChat Cross-Border Commerce
When selling cross-border in China, you may decide to ship directly from your country or have a warehouse in Hong Kong or China in a free-trade zone.
Direct shipping is the easiest solution that requires no upfront investment. However, it takes longer for the goods to reach its final destination, and it is challenging to handle returns. Moreover, the overall shipping cost is higher, and taxes are calculated on the retail price.
As an alternative, you can rent a warehouse in Hong Kong or Mainland China in the Free Trade Zone (FTZ). In this case, you will store the goods in the warehouse, and send the product one by one to the client without having the problems related to delivery time. You will have to clear customs only when the items ship to the final consumer. Local logistics and transportations handle the delivery to Mainland China.
This solution offers several advantages. For instance, you considerably reduce the delivery time, which is a plus for your customers. In addition, returns are easy to manage, especially if the warehouse is in Mainland China. Moreover, you will pay taxes on the transfer price, and in the FTZ, you may benefit from special tax rates.
On the other hand, having a warehouse in Hong Kong and China demands a high initial investment and recurring costs to utilize the facilities.
Deciding on the best logistics for your business may be challenging. There are several factors you must evaluate to understand which solution best fits your business model. As a general rule, some key factors that will guide your decisions are the volume of products sold to China, the price range, and the category of the products traded.
The applicable taxation depends on how the goods are shipped. Taxes differ depending on if you ship them directly or from a warehouse in Hong Kong or Mainland China.
If you ship directly from abroad, depending on which category the products belong to, you will pay a personal import tax that may range from 15% to 60%. The postal tax is calculated on the order value that cannot, in any case, exceed CNY 1,000 per order.
On the other hand, if you ship from a warehouse in Hong Kong or Mainland China, you always have to clear customs. For each shipment, you will have to pay CBEC import taxes that include VAT and Consumption Taxes. The applicable tax rate is more favorable than shipping directly from abroad, it is calculated on the transfer price, and each order has a limit of CNY 5,000.
WeChat Cross Border Payment Service
One of the most significant advantages of selling cross-border on WeChat is the ease of managing international payments. The WeChat app integrates WeChat Pay, a payment gateway that processes all the transactions and sends the money directly to your bank account.
Activating WeChat Pay is pretty straightforward, and it takes no more than 1-3 weeks. Depending on your location, you have to look for a WeChat Pay Service Provider in your country who will guide you through the procedure to set up the service.
WeChat pay allows users to pay for their goods or services directly from WeChat using the Chinese currency. Once the user authorizes the payment, WeChat Pay will transfer the money to your bank account in your local currency.
WeChat Pay supports all major currencies like USD, EUR, GBP, CHF, HKD, JPY, CAD, AUD, NZD, KRW, THB, SGD, NOK, DKK, SEK, and ROB. If a currency is not supported, WeChat pay will process the transaction in USD.
WeChat Pay is widely used in China, and users are very comfortable with this payment gateway. In fact, besides being user-friendly, WeChat Pay guarantees secure payments through data encryption, multi-step verifications, and payment limits.
If you want to start selling in China quickly and with a low budget, or if you're going to test the Chinese market before expanding into it, WeChat Cross-Border E-commerce is one of the best options you have to accomplish this.
QPSoftware can help you in setting up your WeChat Official Account and launching your WeChat shop. China is a very specific market, and a trusted local partner will use their local expertise to make your experience in this market as successful as possible.