E-commerce within China has been growing rapidly, but the country’s adventurous online shoppers aren’t stopping at the border. According to Alipay, China’s largest e-payments provider, consumers are increasingly venturing to foreign websites in search of bargain prices on merchandise that often is not widely available in their home country.
Buying outside of China via the Internet has become so common that the practice has a nickname—hai tao, which roughly translates as “ocean search”—as well as a burgeoning number of Web-based agents who make purchases on behalf of consumers, saving them the hassles of shipping, currency conversions and translating English-language websites. The total value of overseas Chinese consumer transactions through agents reached RMB12 billion ($1.9 billion) in 2010 and is expected to quadruple to RMB48 billion ($7.6 billion) in 2012, according to the China E-commerce Research Center.
Alipay, which handles transactions in 12 foreign currencies and is offered by more than 600 overseas merchants in 34 countries and regions, estimates that over 60% of “ocean search” e-shoppers are young urban women. The most popular product categories are consumer electronics, clothing and baby products. By purchasing name-brand merchandise from well-known overseas websites like Amazon.com, or directly from the manufacturer, shoppers are able to side-step some of the problems plaguing domestic e-commerce such as the prevalence of counterfeit goods. Chinese mothers, in particular, shop overseas because following China’s food safety and product safety scares, they don’t want to risk buying domestic.
The main reason consumers venture overseas, though, is price. Goods purchased from foreign websites are at least one-third cheaper than the same merchandise bought retail in China, Alipay estimates, because online shoppers escape tariffs, taxes and other costs.
Hai tao can be complicated, however. Consumers not only need to be able to read some English, they also are limited to merchants that offer Alipay or Paypal (an e-payments intermediary is needed to convert yuan into foreign currencies), or they must pay with an international credit card, which relatively few Chinese possess. Some e-commerce sites do not ship internationally, so consumers must find a shipping company that will deliver their order at reasonable cost. Little wonder that many consumers opt to buy goods through shopping agents, Chinese websites that for a fee will purchase major brands overseas on behalf of consumers and ship them right to customers’ doorsteps.
Despite the hassles, the ocean search business looks set to boom. Alipay says cross-border payment transactions between Chinese consumers and American and European websites grew eightfold in 2011.
There is one looming obstacle: the Chinese government. Consumers have been getting duty-free prices on products purchased from foreign websites by having them delivered through express mail services as personal mail. This allows them to evade customs inspections as well as tariffs and taxes–even though all packages entering China containing merchandise valued at more than 50 yuan ($7.90) are subject to tax and are supposed to be declared.
Reportedly to stem the rising tide of consumer electronics that are being imported illegally for sale in China’s grey market, the government on April 15 started cracking down. New regulations were imposed on shippers and customs agents are stepping up random checks of incoming mail. As a result, some shipping companies specializing in handling consumer goods purchased overseas briefly shut down; others raised their delivery fees and pre-paid tariffs by 50 percent or more. “The chances of getting any real bargains may become slim,” one online shopper told the Shanghai Daily. “News of the new rules convinces me that Customs is determined to tighten its grip on mailed imports,” she lamented.
Still, some say Chinese consumers will continue to buy overseas because the savings are too attractive to pass up–even with higher shipping costs. A March 31 story in the Southern Metropolis newspaper estimated that imported cosmetics are subject to a 6.5 percent tariff, a 30 percent consumption tax, and a 17% value-added tax, making most cosmetics purchased abroad less than half the price of items available in China.
“Customs cannot possibly check every package,” the online shopper told the Shanghai Daily. “I guess it will still be a game of hide-and-seek.”