Consumer longing for foreign goods motivated by more than price, with product authenticity and trust key.
Much has changed in the Chinese consumer landscape but the cachet attached to foreign goods remains the same, according to a survey by FT Confidential Research, a unit of the Financial Times, showing cost is not the only motivator.
Recent government tax increases and tighter customs treatment of business-to-consumer cross-border ecommerce, dubbed haitao in Chinese, may appear to threaten surging demand for international goods, but the survey shows that consumers are motivated by more than price. Besides, the change in price wrought by the change in tax treatment has been slight. China previously levied a parcel tax on imported goods worth less than Rmb1,000 at a rate of about 10%. But manpower shortages meant customs inspected barely more than 5% of parcels, according to FTCR estimates.
Under the new tax rules, FTCR calculations suggest that prices for haitao goods may eventually rise as much as 10%, but the price differential is still solidly in their favour. Channel checks by FTCR on a basket of goods frequently purchased online found a narrowing of this differential following the changes. But the difference was minor.
But money isn't everything. A large, recent FTCR survey of outbound tourists found that authenticity and trust in the origin of the product were the most important factors driving Chinese consumers to buy from overseas, ahead of cost. Safety and quality assurance were also key factors, reflecting a broader mistrust of local manufacturers among China's growing middle class.
FTCR's survey suggests this is particularly good news for cosmetics brands. Chinese consumers continue to spend heavily on foreign make-up, both online and when travelling overseas.
Gan Tian, a 32-year old Beijing-based office worker, estimates he spends an extra 10% by purchasing sports supplements on US-based iherb, but he likes its Chinese-language website and the fact that it accepts Alipay for payment, and he feels he is guaranteed not to be buying fakes. It is the attitude of consumers such as Mr Gan that means even if prices are forced up by additional regulatory and tax moves haitao should continue its rapid growth.
Spending via haitao channels grew 38.5% to Rmb900bn in 2015, according to iResearch, a market research company, while nearly 60% of respondents to a survey of 1,000 local consumers by FTCR said they would increase spending on overseas products over the next 12 months.
The gradual reduction of the China price premium – bringing prices of goods sold locally more in line with those in the west – may threaten the growth of haitao, but until the trust gap is closed, China's aspirant consumers will continue to buy from international sources.