Alibaba and Amazon Face Rivals in Cross-border E-commerce Race

SHANGHAI, China — A Chinese government push to promote e-commerce has created a host of online retail rivals for Alibaba Group Holding Ltd and Amazon.com Inc catering to shoppers’ fears about the quality and safety of local everyday goods.

Encouraged by tax-relief programmes and other policies that gained traction last year, logistics firms including SF Express and state-owned Sinotrans are seeking to grab a piece of the cross-border e-commerce market which the government estimates to be worth $1 trillion by 2016.

Smaller local internet firms like Netease Inc, which partnered last month with Sinotrans to set up an online bazaar, are also keen to gain from the sector known as “haitao”, which roughly translates as “seeking treasures abroad”.

“Local e-commerce businesses aren’t able to meet the needs of China’s consumers who are increasingly buying from abroad,” said Masa Ren, vice president of international e-commerce services at SF Express, one of China’s biggest logistics firms.

The company launched a portal in January selling lobster, milk powder and other items it sources from retailers in countries such as Canada and Japan.

Since 2012, more than 2,000 firms have registered as cross-border e-commerce businesses, the customs bureau said.

While Beijing’s policies, aimed at reducing smuggling, have helped, the sector is booming thanks to the growing number of affluent Chinese who prefer global brands and whose faith in local goods has been frayed by a slew of safety scandals, mainly involving food.

Advertising executive Fiona Chen says she buys most of her daily necessities from overseas, spending about $200 on items such as shoes and cosmetics online at least once a month.

“There are a lot of items that aren’t available in China, and overseas products, particularly food, are safer,” she said.

Data from consultants iResearch estimates the gross merchandise value of cross-border e-commerce grew to 14.8 percent of China’s total foreign trade last year from 11.9 percent in 2013. By 2017, the sector is expected to contribute about a fifth of total foreign trade, the consultancy said.

Analysts say the smaller haitao players will find it difficult to grab business from giant Alibaba, which controls over 80 percent of all e-commerce in China and which is on a campaign to win U.S. business this year after launching Tmall Global in 2014.

U.S. online retailer Amazon.com is also pushing ahead with expansion in China after it set up shop in Shanghai’s free trade zone in August

But as these big firms go head to head with the minnows, the biggest winner of all may be foreign brands that are being offered a new route into China, said Scott Williams, vice president of programmes and services at the American Chamber of Commerce in Shanghai.

“The doors are open in China for U.S. businesses, this includes big brands as well as small-and-medium enterprises, as the demand for high quality goods and services has never been higher than now.”

By: Emily Kaiser and Miral Fahmy.

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