China is the primary source of cross border e-commerce worldwide, on average accounting for about one third of the origin of all purchases. Prior to the pandemic, cross border e-commerce growth outpaced the growth in domestic e-commerce. Estimates of the cross-border share of total e-commerce range between 15 and 22% of total e-commerce sales, but our research indicates that the figure is probably below 10%. High transportation costs are an impediment to further growth.
There is a lack of consistent and verifiable data to estimate cross border e-commerce flows. Ironically, most of the stated growth prospects of the global air cargo industry seem to hinge off expected leaps and bounds in cross border e-commerce volumes. However, since 2019 China Customs has been tracking and disseminating B2B and B2C ecommerce data as part of its foreign trade statistics. While there are some limitations in terms of quality and coverage, the data provides additional insight into market trends.
Sources of Cross Border E-Commerce
China is the primary source of cross-border e-commerce worldwide, but the importance of China varies on a country level. In general, we find that the primary source of cross-border e-commerce is from neighbouring countries. For example, the primary source of cross border e-commerce in Mexico and Canada is from the United States, and in New Zealand the primary source is Australia. The dashboard below shows an overview of the importance of China as a source of cross-border purchases between 2018 and 2021. Overall, the importance of China has decreased – primarily as a result of changes to VAT thresholds in Europe and lack of intercontinental air freight capacity in 2020 and 2021. Lack of capacity has also continued to be a problem in 2022.
On a global scale, the primary cross border platforms are Amazon, Alibaba (Aliexpress and Lazada), eBay, Wish, Zalando and Shein. Cainiao, the logistics arm of Alibaba stated that it handled an average of 4.5 million cross border parcels a day – that is about the same amount as the combined international volumes of DHL, FedEx and UPS.
Data Limitations
Trade statistics do a poor job of capturing cross border e-commerce, as well as express and postal traffic. Reporting thresholds are the main reason for this. Simplified declaration means that commodity, weight, and quantity information are not collected and as such, customs statistics contain no relevant data on this type of traffic.
Thresholds vary by country. For the European Union it is 1000 EUR or 1000 kg, for the United States it is $2500 for exports and $2000 for imports. The US does prepare a value estimate by month and country for this so-called Low Value (LV) traffic, but no estimates on weight or quantity.
The US Census Bureau have stated that this traffic accounts for about 2.5% of export and 1% of import value. The OECD estimates that this kind of traffic accounts for 1-3% of total trade, but can be as high as 15% in some countries. Moreover, from the perspective of transportation and logistics understanding volumes – in tonnes and pieces – is more important than understanding value.
How Cross Border E-Commerce Moves
Cross border e-commerce tends to move through three distinct channels:
- Postal networks: while this used to be the preferred mode of transportation for cross border e-commerce, changing duty free thresholds have made this form of transportation less attractive due to the inconvenience of customers being forced to pay duties and tax on receipt. Postal traffic is declared under a CN38 way bill.
- Express networks: for express companies such as DHL, FedEx, UPS or SF Express between 40 and 50% of traffic consists of business to consumer shipments. Collectively, express carriers account for about 18% of international air cargo.
- General Cargo Networks: while cross border e-commerce traditionally moved through postal and express networks, today most of the traffic moves through general cargo networks as consolidated traffic that is cleared at destination and then injected into regional distribution networks.
General cargo traffic is captured in trade statistics, while postal traffic is not. As such, we must rely on alternative sources of data to understand cross border flows and market shares. Alternative sources include a mix of reported air carrier and airport traffic data, postal company data, the e-commerce platforms themselves, payment providers, or website traffic data.
In 2017, the OECD established a working group to address this issue and in 2020 published a Handbook on Measuring Digital Trade. Work is ongoing, but we are a long way away from consistent, granular, publicly available data on cross border e-commerce flows.
China E-Commerce Data in Trade Statistics
Since 2019 China Customs has been tracking cross border business to consumer and business to business e-commerce for both imports and exports. The dashboard below shows an overview of this data, which has monthly, province and trading partner level information on weight, number of items and value in US dollars. We encourage you to spend some time exploring the data in the dashboard and share your observations with us.
Some takeaways from the data
- Guangdong province accounts for the largest share of imports and exports, followed by Zhejiang, Shanghai and Fujian Provinces. This matches the flow of dedicated air cargo capacity and express carrier hubs, most notably SF Express.
- Export volumes over a four-year period were about twice as high as imports in weight terms, but the average value per shipment of imports was about five times higher than exports. This makes sense as e-commerce imports to China are more focused around luxury goods and brands, while exports are lower value, generic and unbranded items.
- Reported export weight of business to consumer e-commerce is about 145,000 tonnes per year. That seems low, which may indicate that e-commerce that moves under general airfreight consolidations is not captured under the specific e-commerce codes that China Customs rolled out in 2019.
- Reported Business to Business e-commerce exports cleared under simplified customs procedures have grown strongly.
- B2C exports peaked in November 2019 have not recovered since. The drop is primarily in B2C exports to the US and the European Union. This picture is confirmed in both EU and US data.
- B2C imports also peaked in 2019 and have been following a declining trend in terms of weight and value. This also makes sense as capacity has been constrained and is in line with the overall Chinese trade picture. As China emerges from its self-imposed three-year COVID lockup this may change.
E-Commerce Outlook
Most items purchased by customers from sellers abroad tend to be low value. The average reported value per item ordered from China tends to be about $10 per item, while the average weight is about 800 grams. That does not leave a lot of room for transportation cost.
Most cross-border e-commerce traffic relies on airfreight capacity to move but with average airfreight rates still around $6 per kg (about twice pre-COVID levels), transportation cost is a key constraint to further growth. That also explains persistent lack of profitability in the cross-border business of e-commerce platforms. Alibaba is profitable, but its international commerce business is not.
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