UK Media: China’s implementation of new regulations for customs and trans-border e-commerce will make Australian procurement service hard
2016.11.25 Source: 转载 [ Print ] [ Close ]

Quoted from an article in Financial Times on Oct. 11th. The topic: The golden time of Australian procurement service comes to the end. The new regulations implemented by China on customs and trans-border e-commerce and the desire of parts of luxury bran companies to control the supply chain have hit the once prosperous business.

Besides her own job as an accountant, Jane Li also operates the export business with a fat profit. She is recently migrating from China to Sydney and sells infant formula milk powers and other products to her friends and acquaintances in China, who buy reliable products sold in overseas supermarkets from her with a premium of 50% at most.

Jane Li provides “procurement service”, along with over 100,000 counterparts in Australia.

Bain & Co expresses that such a suitcase business to sell luxury products and health care products has become a global business. In the past year, its sales volume in the world has reached RMB 34-50 billion (as USD 5-7.5 billion).

The prosperity of this business has three reasons. Firstly, these products in China are highly priced; secondly, after a series of food scandal in China, Chinese believe that the safety standard of western brand is higher; thirdly, Chinese middle class has greater interests in consuming products helpful for healthier lifestyle.

The business scale has expanded so much that Coles and Woolworths, large-scale supermarkets in Australia, had to limit the number of tins of infant formula milk powers purchased by each customer last year, due to the concern of lack of products for sharp increase of procurement.

However, the new regulations implemented in China on customs and trans-border e-commerce in this April and the desire of parts of luxury brands to control the supply chain have hit this business. Jane Li expressed that: “the market has cooled”. She can sell products valued as high as RMB 20,000 per month, along with her mother.

Swisse, the largest vitamin and nutritious supplement supplier of Australia, expressed that the number of buyers of their products to sell to other customers has decreased by 100,000 to about 20,000 in the past year. Swisse Sales Director Michael Howard expressed that “the implementation of new regulations on cross-border e-commerce in China will lead to uncertainty to procurement service. We have seen that some buyers dump their stores for crisis reduction.”

In this April, China’s government has targeted at the procurement service; upgraded the tax on baggage and articles accompanying incoming passengers and personal postal articles and the import tax on retailing import products of cross-border e-commerce.

Furthermore, Chinese government has promoted more rigorous regulations on food safety. Since next year, overseas enterprises which want to sell products on cross-border e-commerce websites, shall acquire the license documents mentioned above.

Windeln, online infant and children products retailer in German, expressed that since the implementation of new regulations, its sales volume from Chinese customers has been decreasing.

Meanwhile, more and more overseas brands are looking for sales channels to enter into China. In this March, Swisse settled in Tmall, a Chinese e-commerce website, and planned to set up physical stores in the next 18 months. “We expect that consumers could have a place to go directly related with our brand,” said Howard.

KPMG predicted that in the long run, along with the narrowing price of luxury products between China and western countries, there would be less and less practitioners of procurement service. “They will not continue with the business as long as there is no interest arbitrage,” said Doug Ferguson, Director of KPMG Asian and International Business Practice in Australia.

Chanel is one of the luxury brands that reduce its prices in China. Besides the change of supervision, Ferguson predicted that procurement service industry would be severely hit, along with the panic purchasing of overseas consumer brands by Chinese enterprises and the strengthened control of overseas companies on distribution.

However, the phenomenon of procurement service is far from disappearing. Last month, the special activity as China E-commerce Exhibition, held in Sydney and Melbourne last week, targeting at procurement service, was held especially during the vacation of China’s National Day. Besides, from the perspective of some Australian enterprises, procurement service is still a new channel for them to enter into the broad market of China.

“They have definitely done one thing, that is, providing a network that we could not reach originally,” said Laura Mcbain, CEO of Bellamy's Australia which sells infant organic food and formula milk power. During the last financial year by the end of this June 30th, the income of this company from China and Hong Kong has sharply increased by 300%. She predicted that “quite a part of it” shall come from the sales of procurement service.

The development of supply chain for China has represented the connection-oriented sales in the past. The typical case shall be Tupperware party or Miss Avon. Customers will be very relieved to buy overseas products from someone they trust.

Although, Australian enterprises have been aware that procurement service is an important sales source, yet making hardly efforts to embrace it.

“I’d like to witness the enterprise to launch more activities, e.g. product and marketing symposium, and launching new product targeting at procurement service,” said Coco, a full-time procurement service practitioner who refuses to disclose her full name.