Edited by Liu Jingfeng

The wind has already blown.

Cross-border e-commerce has become a new trend in traditional foreign trade. Over the past five years, the overall trade scale of China's cross-border e-commerce has grown by more than 10 times, making it one of the most prominent opportunities available today. Since the beginning of this year, the growth rate of cross-border e-commerce has been even more pronounced. According to the latest preliminary estimates from the General Administration of Customs, China's cross-border e-commerce imports and exports reached 1.88 trillion yuan in the first three quarters of 2024, a year-on-year increase of 11.5%, 6.2 percentage points higher than the overall growth rate of China's foreign trade during the same period.

The next question is, can traditional foreign trade practitioners seize the opportunity presented by cross-border e-commerce?

Looking back at the development of foreign trade in the past 20 years, it can be seen that in the B2B model, foreign trade factories can only rely on traditional overseas channel customer groups to develop overseas markets and earn meager product processing fees through contract manufacturing. However, the actual overseas distribution and retail resources are mostly in the hands of channel customers.

But today, the new B2C model of cross-border e-commerce has occurred simultaneously with the transformation and upgrading of China's manufacturing industry. This allows factories to adapt to changes and find new business growth points when traditional foreign trade orders decrease.

Product strength and industrial chain synergy are the existing advantages of cross-border merchants. The challenge lies in the fact that more and more people are embarking on the path of cross-border e-commerce. For this rapidly growing new business model, where people gather, rules and regulations must be established to prevent congestion.

Among them, not only cross-border merchants but also service providers in the cross-border chain want to seize the opportunity. For merchants, service providers, and platforms alike, it is necessary to form a synergy and jointly establish a new order of compliance in the cross-border e-commerce industry to become long-term winners.

Based on this, Amazon Global Selling has launched the "Third-Party Cross-Border Solutions" tool, known as the Amazon SPN Service Provider Network. It primarily covers services such as logistics, overseas warehouses, compliance tax, operational support, marketing promotion, finance, brand services, and product display. Through rigorous screening, it brings together third-party service providers from various fields to provide full-lifecycle service support to hundreds of thousands of Amazon China sellers.

In fact, most merchants who are just starting out in cross-border e-commerce find it difficult to locate service providers for niche and new services due to a lack of understanding of market conditions and prices. They are also unclear about compliance tax requirements, local policies, and other issues at their stations. Similarly, the quality of service providers for cross-border merchants varies widely, with high-quality service providers facing strong competition, and even professional service provider teams struggle to quickly establish trust or cooperation with sellers.

The advantages of SPN become apparent here. For merchants, it is like a treasure trove that allows them to bypass redundant information screening and directly find high-quality service providers. For service providers, it is more like a precise intermediary platform that enables them to find demand parties more quickly and solve the problems of acquiring customers and facing complex competitive relationships.

Today, with the help of the SPN service provider network, hundreds of thousands of Amazon China sellers can directly find professional service providers and enjoy efficient and convenient cross-border services. Currently, SPN serves 19 major overseas sites of Amazon, paving a compliant and standardized path for Chinese cross-border merchants exploring overseas markets.

Having products and good products have long been the strengths of Chinese cross-border merchants.

Under the OEM and ODM models, some foreign trade factories possess high-standard, high-quality production capabilities, while others possess R&D and design capabilities and have their own brands. These are the capabilities that cross-border merchants have always possessed. Therefore, in the new model of cross-border e-commerce, the crucial test becomes how to succeed in this new business format.

Ying Xiuzhen, Vice President of Zhongji Ningbo Group Co., Ltd., who has been in the foreign trade industry for 40 years, has an experience that almost encapsulates the transformation of China's foreign trade practices - starting from B2B foreign trade and expanding into cross-border e-commerce platforms. In this process, the company further transitioned to providing services to cross-border merchants.

Whether traditional foreign trade or cross-border e-commerce, both are manifestations of diversified transaction forms. "The difference between traditional foreign trade and cross-border e-commerce lies in whether it is to B or to C, which essentially reflects a difference in trade forms. The key lies in the different proportions between the two. For example, some merchants do 70% of their foreign trade to B and 30% of cross-border e-commerce. However, as the speed of cross-border e-commerce increases, the proportion of merchants doing it also increases accordingly," Ying Xiuzhen told Xiaguang News, which is the current trend in the foreign trade industry.

A notable variable this year is that as more industrial belt merchants begin to expand into cross-border e-commerce, old problems have been amplified. At this year's autumn Canton Fair, many merchants expressed a consensus to Xiaguang News: For foreign trade enterprises just starting out in cross-border e-commerce, how to avoid product homogeneity is a concern. In addition, the rapid growth of cross-border e-commerce has made merchants' pricing more sensitive.

The difference in forms between cross-border e-commerce and traditional foreign trade ultimately tests merchants' foreign trade capabilities.

In Ying Xiuzhen's view, "people in foreign trade know better what kind of products are needed in different countries and regions overseas. The products they develop are more targeted." However, under the traditional foreign trade model, merchants usually sell and distribute through intermediaries or agents, so they lack high-quality customer data and user needs, making it difficult to accurately grasp market trends and make corresponding adjustments. In contrast, the cross-border e-commerce model requires direct communication with C-end customers and a longer chain, posing a greater challenge to merchants' control and operation capabilities in the supply chain.

Behind the apparent difference in models lies a core issue: how to establish trust. Trust in B2B foreign trade comes from importers, and its establishment relies on interpersonal relationships. However, cross-border e-commerce is different. Facing a larger and more dispersed C-end market, merchants need to find more trustworthy partners to ensure a smoother path overseas.

Through SPN, merchants can more accurately find service providers that meet their needs, establishing a more trustworthy and compliant path for cross-border merchants. With a screening mechanism and a match of needs, trust arises through the interplay between the three parties.

From a longer-term perspective, enterprises with brand influence will survive in the healthy development of the industry.

On the path to branding and compliance, the healthy development of cross-border e-commerce is comprehensive and systematic. It requires third-party service providers to offer compliant operations in areas such as taxation, logistics, and payments, which is a prerequisite for smooth and unimpeded progress.

From Ying Xiuzhen's experience, we can see a long-term answer: given that compliance and branding are inevitable trends, how can we avoid falling behind in the changing times?

Identifying pain points and solving problems is how the market communicates with people. Around 2020, based on her insights into cross-border business, Ying Xiuzhen began experimenting with service business and digital exploration.

For example, Shanghai Yingsite Media Technology Co., Ltd. (hereinafter referred to as "Yingsite"), is a wholly-owned subsidiary of Zhongji Huitong Group. This company specializes in digital media solutions, encompassing video production/rendering animations, product photography, visual design, 3D modeling and rendering, and other digital media technologies.

Ms. Shen, the founder of Yingsite, told Xiaguang News that the initial motivation for entering the digital media field was due to the inconvenience many cross-border merchants faced in carrying products to overseas exhibitions, and the inadequacy of electronic sample books in fully showcasing products. "If we could put these products online and allow customers to experience and view them through an iPad or AR glasses, it would bring convenience to communication," she said.

Thus, Yingsite was established to meet this need. However, as an innovative service provider, Yingsite initially faced significant competitive pressure. On the one hand, most merchants were unfamiliar with the final product form of digital media services, which increased communication costs for service delivery. On the other hand, Yingsite also had to contend with intense competition, as many cross-border merchants were unaware of the market and low-quality, low-priced services abounded.

The reality of "bad money driving out good" compelled Yingsite to find ways to make its voice heard in the market.

Currently, Yingsite has become a member of the Amazon SPN service provider network. With the help of SPN, Yingsite can serve more merchants more directly. According to Ms. Shen, in addition to an increase in the number of customers, "being able to truly understand enterprises with 3D modeling needs and gain closer insights into user demands is the most tangible benefit of joining the SPN service provider network."

Furthermore, from a demand perspective, Yingsite also provides interactive services for metaverse exhibition halls, enabling cross-border merchants to interact with foreign traders through simulated offline exhibitions, thereby realizing more customer acquisition possibilities.

With the help of SPN, Yingsite has allowed more customers to understand the true service capabilities of digital media and escape the vicious cycle of price competition. "We have created an online exhibition platform that can help merchants introduce their products to more buyers. Merchants can display their logos (brand trademarks) on our online exhibitions, so why not?" Ms. Shen said that with such connections, many merchants are now modeling more products through Yingsite. The SPN service provider network has given service providers an opportunity to showcase their capabilities and connected high-quality service providers with more merchants, leading to further joint exploration.

Similarly, with more service providers joining, the SPN network can be strengthened and provide even better services. In terms of numbers, SPN services currently cover 19 major overseas sites, and hundreds of thousands of Amazon China sellers will require support from SPN service providers throughout their full lifecycle.

Looking back at the development of cross-border e-commerce, stocking and branding have always been essential choices for overseas enterprises.

In 2001, China officially joined the WTO. At that time, imports and exports and foreign trade soared. Over the following six years, Shenzhen, as a cross-border hub, recorded total exports exceeding US$160 billion, accounting for 14% of the country's total. This is equivalent to the annual GDP of Sichuan Province. It can be said that this was an era where exports yielded significant profits.

Over the next 15 years, cross-border e-commerce experienced an overseas bonus period but also encountered gray rhinos caused by trade frictions. The effectiveness of low-cost manufacturing no longer worked, and high quality, cost-effectiveness, and brand power became filters, clearing out a group of merchants and leaving only compliant ones behind.

The pendulum of the times swings between price and quality, much like the fickle minds of consumers. Today, past experience once again tells us that the same growth logic for cross-border merchants remains unchanged: China's market offers the most cost-effective goods, and cross-border e-commerce is the most direct channel to reach consumers.

However, the question of how to navigate this path more standardly is still being explored. More practitioners choose to be patient, with merchants trying to shake off the sand in their shoes, and platforms screening access channels. Only those with high quality can pave a better path ahead and embrace more merchants. This is a new stage of bug fixing.

As foreign trade enterprises embrace new business forms, cross-border e-commerce represents the new potential energy in this change. Neither platforms, consumers, nor brands can fight alone. SPN serves as the glue that binds brand value and calls for more outstanding service providers to join. In this new development cycle, the joint efforts of SPN and service providers are necessary to create a healthy cross-border e-commerce environment and earn brand power for service providers.

Paying tribute to the leaders of the times and sharing overseas stories and experiences, Xiaguang News will host the second "Global Leaders Conference" on December 5, 2024, in Shenzhen, to inspire more Chinese enterprises to brave the tide and continue exploring the unknown.

Xiaguang News hopes to invite more experienced, insightful, and forward-thinking overseas entrepreneurs to join the conference, gathering the power of leaders to jointly light up the path of global development in the future journey.