Chapter 1 Industry Development
1.1 Overview
Cross-border e-commerce (Cross-border e-commerce) refers to a business model that sells goods or services through the Internet and crosses national or regional borders to achieve international trade. The rise of cross-border e-commerce has benefited from the trend of globalization and digitization, as well as the popularity of the Internet and the continuous improvement of payment, logistics, customs clearance and other infrastructure.
The main forms of cross-border e-commerce include B2B (business-to-business), B2C (business-to-consumer) and C2C (consumer-to-consumer). Cross-border e-commerce involves a wide range of products, covering clothing, electronic products, household items, cosmetics, food and other fields. In cross-border e-commerce, consumers can choose the products they need from around the world, while sellers can expand overseas markets and achieve global sales.
The advantage of cross-border e-commerce is that it can make full use of global market resources, eliminate geographical restrictions through the Internet, expand sales scope, lower market entry barriers, reduce intermediate links, and improve efficiency. At the same time, cross-border e-commerce also provides consumers with more choices, can buy goods that are difficult to obtain in China, and enjoy lower prices and better services.
Cross-border e-commerce also faces some challenges, such as laws and regulations in different countries and regions, currency exchange rates, language and cultural differences, logistics and distribution, etc., which need to be overcome by sellers in cross-border operations.
Figure Features of cross-border e-commerce
Source: MBA Think Tank of Qianji Investment Bank, Asset Information Network
In a narrow sense, cross-border e-commerce refers to cross-border retail e-commerce, which belongs to transaction entities in different customs borders, uses the Internet to complete transactions, pay and settle, and deliver goods to consumers through cross-border logistics. The transaction process includes: 9610, 1210 , 1239 and other customs supervision code modes. Cross-border e-commerce in a broad sense refers to the application of e-commerce in import and export trade and retail, including: import and export cross-border e-commerce, cross-border e-commerce (B2B, B2C, C2C) and customs supervision codes such as 9710 and 9810 and related services business.
Since 2020, affected by the epidemic and the overall development of the industry, cross-border e-commerce has emerged with the following new features:
- Epidemic accelerates online development of foreign trade enterprises
- The stay-at-home economy has spawned new hotspots for cross-border consumption
- Cross-border e-commerce channels are increasingly diversified
- Overseas warehouses have become an important force to ensure the smooth cross-border supply chain
- Acceleration of cross-border payment internationalization and compliance process
1.2 Status
Data show that since 2016, the transaction scale of my country's cross-border e-commerce industry has maintained a growth rate of more than 20%. In 2020, the transaction scale of China's cross-border e-commerce industry will reach 12.5 trillion yuan.
Figure 2016-2021 Cross-border e-commerce industry transaction scale statistics (trillion yuan)
Source: Asset Information Network Qianji Investment Bank Research Report Network
In 2022, the import and export volume of cross-border e-commerce (including B2B) will be 2.11 trillion yuan, a year-on-year increase of 9.8%. Among them, exports were 1.55 trillion yuan, a year-on-year increase of 11.7%.
Figure 2013-2021 national cross-border e-commerce import and export volume and year-on-year growth rate
Source: Asset Information Network Qianji Investment Bank General Administration of Customs
Chapter 2 Business Model and Revenue Model
2.1 Industry chain value chain
From the perspective of the retail industry, cross-border e-commerce is an important part.
Figure retail industry chain
Source: Qianji Investment Bank iFinD
From the perspective of the logistics industry chain, cross-border e-commerce is an important customer of the logistics industry.
Figure logistics industry chain
Source: Qianji Investment Bank iFinD
2.2 Business model
The business models of cross-border e-commerce mainly include the following types:
- B2B model: Business-to-business cross-border e-commerce model, mainly for trade cooperation between countries, such as international procurement, supply chain management, etc. B2B cross-border e-commerce usually needs to process a large number of orders and goods, and needs to establish a corresponding supply chain management system to ensure the smooth completion of transactions.
- B2C model: Business-to-consumer cross-border e-commerce model, which mainly sells foreign goods to overseas consumers through e-commerce platforms, such as Amazon and eBay. B2C cross-border e-commerce usually needs to process a large number of orders and goods, and needs to establish a corresponding logistics distribution system to ensure that the goods can reach consumers in a timely manner.
- C2C model: Consumer-to-consumer cross-border e-commerce model, mainly through e-commerce platforms to allow consumers to conduct transactions, such as Taobao, eBay, etc. C2C cross-border e-commerce usually needs to establish a credit evaluation system and a transaction guarantee system to ensure the safety and reliability of transactions.
- O2O model: The online-to-offline cross-border e-commerce model mainly uses online platforms to guide consumers to offline stores for shopping or services, such as overseas shopping services. O2O cross-border e-commerce usually needs to establish a corresponding service system and logistics distribution system to ensure that consumers can shop and enjoy services smoothly.
- F2C model: A cross-border e-commerce model in which manufacturers directly supply consumers, mainly manufacturers sell their products directly to overseas consumers, such as Huawei official website, Xiaomi official website, etc. F2C cross-border e-commerce usually needs to establish a corresponding supply chain management system and after-sales service system to ensure that consumers can enjoy the products and services directly provided by manufacturers.
- Dropshipping mode: direct mail cross-border e-commerce mode, mainly by foreign suppliers directly mailing goods to foreign consumers through e-commerce platforms, without going through middlemen, such as Wish, AliExpress, etc. Dropshipping cross-border e-commerce usually needs to establish a corresponding logistics distribution system and after-sales service system to ensure that consumers can receive goods in time and enjoy after-sales service.
- Crowdfunding model: Crowdfunding cross-border e-commerce model, which mainly combines the production and sales of innovative products with crowdfunding through crowdfunding platforms, such as Kickstarter, Indiegogo, etc. Crowdfunding cross-border e-commerce usually needs to establish a corresponding innovative product development system and marketing promotion system to attract the attention and support of investors and consumers.
The business models of cross-border e-commerce are very diverse, and different models are suitable for different business needs and market conditions. At the same time, the business model of cross-border e-commerce is also constantly evolving and innovating, especially with the continuous emergence of new technologies and new business models, cross-border e-commerce will have more business models and development opportunities.
Figure 2020 my country's main export products of cross-border e-commerce
Source: Asset Information Network Qianji Investment Bank Research Report Network
In terms of imports, China mainly imports maternal and child products, daily chemical products, beauty products, and some imported food from Australia, Japan, and South Korea.
Figure 2020 my country's cross-border e-commerce major imports
Source: Asset Information Network Qianji Investment Bank Research Report Network
Taking CIMC as an example to analyze the cost structure, it can be seen that operating costs account for a relatively high proportion, followed by management expenses and income tax expenses.
Tuji Group's main business cost analysis
Source: Qianji Investment Bank iFinD
Composition of operating income of Tuji Group (000039.SZ) (unit: %)
Source: Qianji Investment Bank iFinD
Composition of operating income of Tuyinzhijie (300085.SZ) (unit: %)
Source: Qianji Investment Bank iFinD
Composition of operating income of Tujihong (002803.SZ) (unit: %)
Source: Qianji Investment Bank iFinD
2.3 Technology Development
According to iFinD data, in the cross-border e-commerce industry, the three listed companies with the largest number of company patents are Jianlin Home Furnishing, Great Star Technology, and Lege, with 2,155, 1,824, and 1,292 patents respectively.
Table TOP20 total number of cross-border e-commerce patents (as of March 9, 2023)
Source: Qianji Investment Bank iFinD
2.4 Policy and Regulation
The administrative supervision departments of cross-border e-commerce are the Ministry of Commerce and the General Administration of Customs. Among them, the Ministry of Commerce is mainly responsible for formulating development strategies and policies for domestic and foreign trade and international economic cooperation, drafting laws and regulations for domestic and foreign trade and foreign economic cooperation, and formulating departmental regulations. The General Administration of Customs of the People's Republic of China is mainly responsible for supervising inbound and outbound business activities, collecting customs duties and other taxes and fees, compiling customs statistics and undertaking port management, bonded supervision, customs inspection, investigation of smuggling, customs protection of intellectual property rights, etc.
The industry self-regulatory organization of cross-border e-commerce is the China Electronic Commerce Association, which is a self-regulatory organization responsible for industry management and services. The sustainable and healthy development of trade and cross-border e-commerce for import and export. Its cross-border e-commerce professional committee specializes in e-commerce, cross-border e-commerce basic research and cross-border business practice.
The main regulatory laws and regulations of the industry include "Opinions on Implementing Relevant Policies Supporting Cross-border E-commerce Retail Export", "General Administration of Customs Announcement No. Several Opinions on Stable Growth", "Guiding Opinions of the General Office of the State Council on Promoting the Healthy and Rapid Development of Cross-border E-commerce", "Several Opinions of the State Council on Promoting the Stabilization and Improvement of Foreign Trade", "Replication and Promotion of Cross-border E-commerce Comprehensive Experimental Zone Exploration and Formation" Letter of mature experience and practice, "E-Commerce Law of the People's Republic of China", "Notice on Tax Policies for Retail Exports in Cross-Border E-Commerce Comprehensive Pilot Zone", "Notice on Improving the Supervision of Cross-Border E-Commerce Retail Imports", "On Cross-Border E-Commerce Notice on Tax Policies for Retail Export Goods such as E-Commerce Comprehensive Pilot Zones, Notice on Supporting the Development of New Trade Formats, Implementation Opinions on Promoting Innovative Development of Foreign Trade, etc.
Chapter 3 Industry Valuation and Global Leading Companies
3.1 Comprehensive financial analysis and valuation methods of the industry
Valuation methods for the cross-border e-commerce industry can choose price-earnings ratio valuation method, PEG valuation method, price-to-book ratio valuation method, price-to-cash ratio, P/S market-to-sales ratio valuation method, EV/Sales market-to-sales ratio valuation method , RNAV revaluation net asset valuation method, EV/EBITDA valuation method, DDM valuation method, DCF discounted cash flow valuation method, NAV net asset value valuation method, etc.
Chart the historical PE/PB trend line of cross-border e-commerce
Source: Qianji Investment Bank iFinD
3.2 Industry Development
The development process of cross-border e-commerce industry can be divided into the following stages:
- Initial stage (1990s-early 2000s): Cross-border e-commerce started in the 1990s, when some international companies mainly carried out international trade through the Internet. In the early 2000s, with the development of the Internet and the rise of e-commerce, cross-border e-commerce has gradually become a new type of international trade model.
- Development stage (mid-2000s-early 2010s): In the mid-2000s, cross-border e-commerce entered a stage of rapid development, and governments and enterprises of various countries began to attach importance to the development of cross-border e-commerce. At the same time, the continuous development of Internet technology and payment methods has provided more powerful support for the development of cross-border e-commerce. Representative companies at this stage include eBay, Amazon, Alibaba, etc.
- Prosperous stage (mid-2010s-2018): In the mid-2010s, cross-border e-commerce entered a prosperous stage, mainly manifested in the continuous increase in the scale of cross-border e-commerce transactions and industry participants. At the same time, cross-border e-commerce platforms and logistics companies began to conduct global layout and competition, creating a global cross-border e-commerce ecosystem. Representative companies at this stage include Taobao International, Amazon Global Shopping, Wish, PayPal, DHL, etc.
- Adjustment stage (2018-2020): Since 2018, the cross-border e-commerce industry has entered an adjustment stage, mainly manifested in the adjustment of national policies, the rise of trade protectionism, and the increase in operating risks of cross-border e-commerce platforms. Representative events at this stage include the US’s trade sanctions against China and the EU’s imposition of digital taxes.
- New stage of development (2020-present): The outbreak of the new crown pneumonia epidemic in 2020 has promoted the development of global cross-border e-commerce, and many traditional enterprises have begun to turn to the field of cross-border e-commerce. In addition, the emergence of emerging technologies and new business models has brought more opportunities and challenges to the development of cross-border e-commerce. Representative events at this stage include the outbreak of the new crown pneumonia epidemic and the accelerated development of global cross-border e-commerce.
3.3 Industry Risks
The risks faced by the cross-border e-commerce industry mainly include the following aspects:
- Policy risks: Different countries and regions have different policies and regulations, and there may be policy risks, such as trade protectionism, tax policies, customs supervision, etc.
- Legal risks: Cross-border e-commerce involves the laws and regulations of many countries and regions, and there may be legal risks in terms of intellectual property rights, consumer protection, and legal validity of contracts.
- Market risk: There are differences in the market environment and consumer demand in different countries and regions. Cross-border e-commerce companies need to understand market demand and make corresponding adjustments.
- Financial risks: Cross-border e-commerce companies need to conduct transactions and settlements in multiple currencies, and there may be financial risks such as exchange rate fluctuations and insufficient liquidity.
- Logistics risk: The logistics links of cross-border e-commerce are complex, including customs clearance, transportation, warehousing and other links, and there may be risks such as logistics delays and cargo damage.
- Competition risk: The cross-border e-commerce market is highly competitive, and there is competition from major domestic and foreign e-commerce companies.
- Data security risks: Cross-border e-commerce companies need to process a large amount of consumer data, and there may be data leakage and information security issues.
Cross-border e-commerce companies need to be aware of these risks and take corresponding measures to avoid and manage these risks, such as operating in compliance with regulations, establishing a reasonable risk management system, and strengthening logistics and data security protection.
3.4 Competition Analysis
The cross-border e-commerce market is highly competitive, and the competition is mainly reflected in the following aspects:
- Price competition: Cross-border e-commerce companies need to continuously optimize supply chains and cost control in order to provide more competitive prices and attract consumers.
- Commodity quality and variety competition: Cross-border e-commerce companies need to provide high-quality, unique commodities and diversified varieties to meet the diverse needs of consumers.
- Brand competition: Cross-border e-commerce companies need to establish brand awareness and loyalty, and improve consumer satisfaction and reputation.
- Logistics service competition: Cross-border e-commerce companies need to provide fast and reliable logistics services to meet consumers' needs for delivery speed and service quality.
- Marketing competition: Cross-border e-commerce companies need to carry out differentiated marketing activities to attract and retain consumers.
- Technological innovation competition: Cross-border e-commerce companies need to continuously optimize and innovate technologies to improve user experience and operational efficiency.
In competition analysis, companies need to understand and analyze the strengths and weaknesses of their competitors, assess market demand and changes in consumer behavior, formulate reasonable market strategies, and improve their competitiveness. Enterprises can conduct competitive analysis through data analysis, market research and other means to understand the dynamic changes in the market and the competitive landscape, predict market trends in advance, and seize market opportunities.
From a regional point of view, according to the "China E-Commerce Report" released by the National E-Commerce Public Service Network sponsored by the Ministry of Commerce, the top five provinces and cities in my country's cross-border e-commerce retail import and export volume are Guangdong Province, Zhejiang Province, and Henan Province. province, Shanghai and Tianjin, among which the total amount of Guangdong Province far exceeds that of other provinces and cities. The leasing industry is relatively fragmented, with a single leading institution accounting for about 4% of the market in terms of assets.
As of September 2021, my country has a total of 105 cross-border e-commerce comprehensive test areas. Among them, the number of cross-border e-commerce comprehensive pilot areas in Guangdong Province has increased to 13, ranking first in the country.
In terms of imported cross-border e-commerce, my country's imported cross-border e-commerce B2C market presents a pattern of one superpower and many strong ones. The top cross-border e-commerce companies include Tmall Global + Kaola Haigou, JD International, Vipshop International, etc. The market as a whole is on an upward path, the Ali department has a solid position in the import 2C end, and the market structure is basically stable.
3.5 Important Competitors in China
(1) Tmall Global is an imported retail platform under Alibaba. It is committed to providing Chinese consumers with global imported goods and direct access to overseas lifestyles. It also helps overseas brands directly reach Chinese consumers and build brands. The platform of choice for cognitive and consumer insights.
As of now, more than 29,000 overseas brands from 87 countries and regions around the world have entered Tmall Global, covering more than 5,800 categories, and more than 80% of them are entering China for the first time. As one of Alibaba's globalization strategies, Tmall Global will work with overseas brands to make Chinese consumption more convenient and "buy the world" with higher quality and discover more new global trends.
(2) Kaola Haigou mainly focuses on categories such as maternal and child products, beauty and personal care, food and health care, home digital, clothing, shoes and bags. In-depth direct procurement of goods from the source of origin to ensure product quality; large-scale bulk purchases to ensure competitive prices; self-operated stocking and government supervision, 30-day worry-free after-sales service; in-depth cooperation with customs and bonded areas, electronically speedy customs clearance, 3-15 days after placing an order delivered in business days. Support NetEase, Alipay, online banking, credit card and other payment methods, bid farewell to the trouble of multi-currency payment. Kaola will strive to set off a wave of zero-experience and zero-risk nationwide online shopping in the industry, so that Chinese people can completely get rid of the troubles of private purchasing agents and traditional overseas shopping. Kaola Haigou adheres to the fine tradition of integrity, responsibility and attitude, provides customers with high-quality goods and services, and aspires to become the leader of China's cross-border e-commerce, so that every consumer can buy assured, high-quality , Comfortable overseas products.
(3) AliExpress (English name: AliExpress) is a cross-border e-commerce platform built by Alibaba for the international market, and is called "the international version of Taobao" by the majority of sellers. AliExpress is the third largest English-language online shopping website in the world for overseas buyers. It conducts guaranteed transactions through Alipay international accounts and uses international logistics channels for transportation and delivery. The range of customers and buyers has covered more than 220 countries and regions, covering a total of 30 first-level industry categories such as clothing and apparel, 3C, home furnishing, and accessories.
(4) Jingdong International (JD.O): Jingdong International is a brand of Jingdong Group, which is mainly engaged in cross-border imported goods business. It was formerly known as JD.com's "Haitun Global" and "JD Global Shopping".
As the first consumer platform in China that fully focuses on large-scale import business, JD International has brought consumers a more high-quality and richer shopping experience for imported goods through comprehensive upgrades in the four dimensions of consumption scenarios, marketing ecology, quality and service, and investment promotion. , so as to create a reliable one-stop consumption platform for imported goods. In terms of general trade imports, it has attracted nearly 20,000 brands with nearly 10 million SKUs, covering fashion, mother and baby, nutrition and health care, personal care and beauty, 3C, home furnishing, imported food, automotive supplies and other product categories, from the United States, Canada, South Korea, Japan, Australia, New Zealand, France, Germany and more than 70 countries and regions.
(5) Vipshop International (VIPS.N): Vipshop will focus on the "good product" strategy, insist on cooperating with "good brands", dig deep into "good styles" through a professional buyer team, and establish a strong supply chain with brands" "Good quality" supply system, realize "good price" of goods, and provide consumers with high-quality and cost-effective products.
In July 2014, iResearch's "China Online Display Special Sale Market Research Report" pointed out that China's online retail market has shown three major TJV formats, namely the bazaar platform model, traditional B2C model and Vipshop special sale model. In the entire online special sale market in China, Vipshop has become the No. 1 special sale in China with a market share of 38.1%. Vipshop has pioneered the unique business model of "brand discount + limited-time purchase + authentic product guarantee" in China, and continues to deepen it into a "selected brand + deep discount + limited-time purchase" authentic product sale model, launching hundreds of authentic brands on time every day Special sales, providing consumers with super value shopping surprises. As of the second quarter of 2021, Vipshop has achieved 35 consecutive quarters of profitability, breaking the e-commerce industry record.
(6) Yinzhijie (300085.SZ): Shenzhen Yinzhijie Technology Co., Ltd. was established in October 1998 and listed on the Growth Enterprise Market of the Shenzhen Stock Exchange in May 2010 with a stock code of 300085. The company's core business is financial technology services, mainly including: providing software products, software development, digital financial solutions, financial special equipment and technical services for the financial industry; providing mobile information services and mobile business solutions for enterprises; e-commerce; investing in the Internet Equity of financial institutions and financial service institutions such as insurance, securities, personal credit, etc.
(7) Jihong Co., Ltd. (002803.SZ): Xiamen Jihong Technology Co., Ltd. was established in 2003. Its main business is the display and packaging of fast-moving consumer goods, serving leading customers in the fast-moving consumer goods industry. Committed to establishing a packaging full-category supply chain procurement scenario around brand fast-moving consumer goods customers, and providing customers with all-round services for one-stop procurement. The company was successfully listed on the Shenzhen Stock Exchange in 2016 with the stock code SZ002803. After going public, the company developed internally and externally, rapidly expanded the packaging business, and relied on the origin of creative design to cut into precision marketing and cross-border e-commerce business. In November 2019, the company established a wholly-owned subsidiary Shenzhen Jilian Blockchain Technology Co., Ltd. to develop the company's product technology and solutions through blockchain technology innovation, and empower the company's packaging and Internet business.
3.6 Global Key Competitors
(1) Amazon (AMZN.O): It is the largest online e-commerce company in the United States, located in Seattle, Washington State. It is one of the earliest companies on the Internet to start operating e-commerce. Amazon was founded in 1994. At the beginning, it only operated the online book sales business. Now it has expanded to a wide range of other products and has become the online retailer with the largest variety of commodities in the world. In the name of the company, it also includes Alexa Internet, a9, lab126, and Internet Movie Database (Internet Movie Database, IMDB) and other subsidiaries.
Amazon and other sellers offer customers millions of unique new, refurbished and used items in categories such as books, movies, music and games, digital downloads, electronics and computers, home and garden, toys, baby products, food, apparel , footwear and jewelry, health and personal care products, sports and outdoor products, toys, automotive and industrial products, etc.
(2) Ebay (EBAY.O): eBay Inc. was first established in September 1995 and incorporated in California in May 1996. The company is a global commerce platform and leader in online payments. eBay mainly provides online sales of goods and services, and also provides online commerce, or e-commerce, platforms, online payment and online communication services to individuals and merchants in various fields. eBay is available in the US, UK, Australia, China, China (Hong Kong), Argentina, Austria, Belgium, Brazil, Canada, Germany, France, Ireland, Italy, Malaysia, Mexico, Netherlands, New Zealand, Poland, Singapore, Spain, Sweden, Switzerland , Thailand, and Turkey all have independent platforms suitable for local consumers to browse, taking into account the browsing experience of users in different regions. However, eBay's core market is still in Europe and America.
(3) Esty (ETSY): Etsy, Inc. is an e-commerce website for handicrafts and antiques founded in 2005. It is headquartered in Brooklyn, New York, and has 1,508 full-time employees. It is an e-commerce company. ETSY has strict regulations on the handicrafts sold: each product must be designed by the designer himself and must be handmade. However, since 2013, Etsy began to allow sellers to outsource production and customer service, which expanded the income of some sellers and boosted Etsy's turnover.
(4) Wish (WISH): An online e-commerce platform in the United States that facilitates transactions between buyers and sellers. Wish was founded in 2010 by Piotr Szulczewski and Danny Zhang. Wish is operated by ContextLogic Inc. based in San Francisco, USA. The Wish platform employs browsing technology to personalize shopping based on each customer's vision without relying on search bar formatting. ContextLogic, Inc.'s platform combines technology and data science capabilities, an innovative and discovery-based mobile shopping experience, a suite of essential merchant services, and a vast array of users, merchants, and items. This combination has made it the most downloaded shopping app in the world over the past three years, according to a Sensor Tower report.
Chapter Four Future Industry Outlook
The global market scale of cross-border e-commerce is constantly expanding, and the future development prospects are broad. The following are some prospects for the future development of cross-border e-commerce:
- Optimizing cross-border logistics: With the continuous advancement of logistics technology and the continuous optimization of logistics services, cross-border e-commerce logistics costs will continue to decrease, and delivery speed and service quality will continue to improve.
- Expansion of emerging markets: With the continuous development of global trade and the rise of emerging markets, cross-border e-commerce will continue to expand into new markets and business areas.
- Artificial intelligence and big data applications: Cross-border e-commerce companies will continue to apply artificial intelligence and big data technologies to achieve intelligent marketing and operations, and improve corporate efficiency and profitability.
- Interconnection of cross-border e-commerce platforms: Cross-border e-commerce platforms will continue to be interconnected to improve interoperability between platforms and facilitate consumers' shopping experience.
- Green cross-border e-commerce: Cross-border e-commerce will pay more and more attention to environmental protection and sustainable development, and promote the development of green cross-border e-commerce.
- Cross-border e-commerce + offline physical stores: Cross-border e-commerce companies will increasingly tend to operate in a way that combines online and offline channels to expand diversified sales channels.
In short, in the future, cross-border e-commerce will be intelligent, green, diversified, and globalized as the main development trends. Enterprises need to continue to innovate and optimize to meet consumer needs and market changes.
Cover Photo by Alice Donovan Rouse on Unsplash