KuanJinTong arrives to provide tax free imported goods
In Shanghai an e-commerce platform is starting to make a name for itself. It is called Kuajingtong.
Part of the Orient Electronic Payment Co, state approved-company, the idea is as follow:
Based in the Shanghai Free Trade Zone it is very similar to Alibaba in spirit but for Chinese customers wishing to buy imported goods without having to pay the huge import duties that usually apply.
A state-controlled, supported and limited company
However do not count on buying anything you want : the good has to be approved by the government via the General Administration of Customs as a way of keeping Chinese consumers safe when purchasing imported goods.
A legitimate claim for customers safety or a way to control the foreign competition?
Even though it is what it is claimed, one must wonder why such worry about scams with foreign entities while there are already so many issues on local e-commerce platforms.Is it truly for the good of the customers?
There is one thing though: controlling which brand can enter and which one cannot allows the government to protect the local brands without being too obvious about it. Indeed, with the numerous scandals on local e-commerce platforms it is logical to question the intent of such a measure.
As for Kuanjingtong, business is moving forward with 50 foreign companies selling 500 products to Chinese customers without middle man.
Whatever the government motives are or one’s doubts about it, it is clear that the e-commerce platform has found its target. The Chinese consumers have a high need for those goods reputed to be of higher quality and safer. These are two critical criteria amongst Chinese these days with all the scandals happening all over the Chinese market.
The company may well be the one to bring order in a market in a state of complete chaos and counterfeiting to try to respond to this high and uncontrollable demand from the mainland Chinese.
e-commerce Kuanjingtong uses a method quite unusual for a BtoC platform in China that is actually quite similar to Alibaba that uses this in BtoB. Individual commerce stores sell their goods on-line and benefit from Kuajingtong for a commission on sales.
Usually foreign companies have to abide by the very strict laws of the Chinese legal system like described here,when doing e-commerce in China.
Two FTS business models to choose from
In the FTZ however the rules are not the same. Foreign e-commerce firms can directly set up an online store using Kuajingtong using one of the business models described below:
FTZ Model : Companies must subscribe to the Shanghai FTZ register, after which they are given a customs code. Goods are firstly delivered into the Zone and next to the customers all over China.
Direct Shipping Model. Here Companies may deliver the wares directly to their customers in China. The drawback of this model is that they still need to have an agent in China for after-sales services
Kuajingtong accepts several payment methods : UnionPay, Easypay.net and SPD Bank are some example.
Easy pay is especially interesting for Chinese customers since it is part of the same group as the e-commerce platform is, Orient Electronic Payment Co. It is one of the very few companies authorized to practice payment in yuan outside China from the FTZ. This allows Chinese to make transaction in RMB while having the payment delivered to the company in USD. OEP charges a 2% transaction fee.
Kuanjingtong has set up a cost efficient model, bonded warehouses, that allows reduced logistics costs. However the state-backed company has still to abide by the customs regulations in term of amount of goods a customer can buy.
The company advertisement boldly stated that its goods were much cheaper than on most of the other e-commerce platforms. However a study made by China Briefing using random product sampling revealed the following truth :
As you can see here Kuajingtong is not only not cheaper than most e-commerce platforms but several times more expensive on some goods listed here: about 50% more expensive on average with Taobao and globally on a par with Amazon.
While it could have been expected that such a discovery would ruin its reputation in a country where price is the first criteria, the e-firm is still standing. This is mainly caused by its quite unique concept, channels and offer. Besides, it is only the beginning for the platform, it is most likely that once the offer will expand, prices will reach a satisfactory level. This is especially true when the number of customers will have reached a critical mass.
The question is: With such a smart offer, how long before competitors come barging in to take their share? The answer here is probably no given that this company is state supported and the Chinese government is quite fond of local monopoly. Alibaba, Baidu are a few of these.
Digital marketing-wise, what can be done?
It wouldn’t be surprising to see campaigns similar to what is already being done on e-commerce websites such as Taobao or Tmall with digital marketing campaigns redirecting to the on-line shop of a foreign company
Typical solutions :
Positioning yourself as a customs-free company, making sure that your price are indeed much lower than the comparable offer on Tmall and Taobao with raw data is the key
You can insist on the foreign part of the offer as well. This would use the trust Chinese people have on the foreign goods
SEO/SEM campaign to increase your Kuajingtong Shop, its advantages compared to competitors not using this platform. This would be very useful at first with very few companies on it. The ideal moment to do this would be … now. Indeed, even though 50 companies seems like a big number it is still small compared to the scores of firms listed on the already well-established Chinese e-commerce platforms.
Campaign on the Chinese social media would be a boon as well. It would quickly spread a positive message about your brand
These are a few steps that could be taken in order to improve your business using this e-commerce platform.
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