Research on The Development Strategy of Chinese Cross-Border E-Commerce SMEs under the Background of COVID-19

Abstract

Purpose: This study analyses the current development of cross-border e-commerce in China, outlines the challenges faced by Chinese cross-border e-commerce SMEs, and finally summarises the development strategies of Chinese cross-border e-commerce SMEs in the post-covid-19 era, which will provide opinion references for the development of Chinese cross-border e-commerce SMEs. Research design, data and methodology: The methodology used in this study is to analyse the current situation of cross-border e-commerce development in China in the context of covid-19 through literature; and to summarise the challenges encountered by Chinese cross-border e-commerce SMEs through semi-structured interviews. Results: The article summarises the current status of China's cross-border e-commerce development in the context of covid-19 in terms of cross-border e-commerce trade volume, cross-border e-commerce enterprise and user scale, cross-border e-commerce logistics, cross-border e-commerce global co-operation, government policy, and cross-border e-commerce product distribution, outlining challenges encountered by China's cross-border e-commerce SMEs in terms of logistic pricing, operating capital chain, product service support, and trade protection The paper Finally, it is pointed out that Chinese cross-border e-commerce SMEs must adopt new strategies to adapt to the new development in the context of covid-19. Conclusions: Specific development strategies are provided for Chinese cross-border e-commerce enterprises and reference suggestions are provided for the post-covid-19 era.

1. Introduction

With the in-depth development of economic globalization and internet technology, the emerging business model of cross-border e-commerce has been rapidly promoted around the world and has become a powerful engine for global economic development. Cross-border e-commerce is different from traditional international trade. It can bypass intermediate links such as foreign agents and distributors, and realize direct transactions between SMEs and individual wholesalers, which greatly reduces transaction costs. It may also face less tariff and non-tariff barriers. It provides a new path for SMEs to innovate and develop.

Many scholars have given their views on the impact of cross-border e-commerce on China's economy. Sun (2020) believes that China’s cross-border e-commerce has entered a mature growth period, the market scale is getting bigger and bigger, the market development prospects are broad, with the implementation of the "Belt and Road" initiative in depth, China’s cross-border trade market will continue to expand, cross-border e-commerce future development momentum is strong. Fei (2019) believes that cross-border e-commerce in China is developing rapidly and will become the development trend of China's foreign trade. Pan (2017) also believes that China's cross-border e-commerce is developing rapidly, with the scale of development rising year by year and the e-commerce platform forming an "oligopoly effect". In general, Chinese scholars generally believe that the development of cross-border e-commerce in China faces better development conditions and opportunities (Yang, 2018).

However, the sudden arrival of Covid-19 has brought many different effects to the development of cross-border e-commerce. Meng (2020) believed that the Covid-19 has affected cross-border e-commerce in terms of transaction suspension and disappearance of orders, but consumers’ shift from offline consumption to online has promoted the growth of China’s total cross-border e-commerce imports and exports. Li (2020) studied the impact of the Covid-19 on cross-border e-commerce logistics. The prevention and control of the Covid-19 caused delays in cross-border logistics (Zhan, 2020). At the same time, cross-border e-commerce companies were affected by the reduction of global flights, which increased logistics costs. Lin (2020) proposed measures for cross-border e-commerce to deal with the Covid-19. He believed that cross-border e-commerce platforms should introduce corresponding policies to help SMEs, adjust sales plans and maintain sufficient communication with foreign customers.

On this basis, this paper will explore the current situation and development trend of China's cross-border e-commerce industry under the impact of the COVID-19, and provide countermeasures and suggestions for the smooth development of cross-border e-commerce.

2. The Current Situation of Cross-Border E-Commerce Development in China

2.1. Cross-Border E-Commerce Trade Volume Continues to Grow

Since 2015, China's cross-border e-commerce retail import and export has continued to develop, and the scale of transactions has continued to expand (Ren, 2019). From 2015 to 2020, the transaction volume was 5.4 trillion RMB, 6.3 trillion RMB, 7.6 trillion, 9.1 trillion, 10.8 trillion and 12.5 trillion respectively. After 2016, it entered a relatively steady growth stage, with growth rates of 16.7% in 2017, 20.6% in 2018, 18.7% in 2019, and 19% in 2020.

Figure 1: China's Cross-border E-Commerce Transaction Scale and Forecast

Furthermore, the proportion of cross-border e-commerce trade volume in China total foreign trade import and export is also increasing. In 2015, cross-border e-commerce trade volume accounted for 22% of total import and export volume, and in 2020, it accounted for 38.87%, and the proportion continued to increase. Cross-border e-commerce has become an important force in the growth of China's foreign trade.

Table 1: China's Import and Export Trade and Cross-border E-Commerce Transaction Volume (trillion RMB)

2.2. The Scale of Cross-Border E-Commerce Companies and Users Continues to Expand

As of 2020, there are 23,265 cross-border e-commerce enterprises in China, including cross-border e-commerce enterprises, cross-border logistics enterprises, cross-border payment enterprises, cross-border trading platforms, cross-border regulatory agencies, of which 19,693 are cross-border e-commerce enterprises, accounting for 84.6% of the total, which shows its huge scale. The sudden outbreak of the Covid-19 has caused a huge impact on traditional foreign trade, and foreign trade enterprises have turned to the cross-border e-commerce market.

China's cross-border e-commerce users from 2015 to 2020 were 23 million, 41 million, 65 million, 101 million, 154 million and 230 million respectively. The annual growth rate is above 50%, reflecting the strong demand for cross-border e-commerce.

Table 2: China’s Import and Export Trade and Cross-border E-Commerce Transaction Volume (million)

2.3. Diversity of Cross-Border E-Commerce Logistics Choice

The development of cross-border e-commerce has put forward a greater demand for cross-border logistics. China’s cross-border logistics has developed rapidly, and the cross-border logistics lines around the world have been continuously expanded, and logistics facilities have become increasingly perfect (Wang, 2019). At present, the logistics system of cross-border e-commerce is divided into four modes, postal parcel, international express, special line logistics and overseas warehouse. In China’s cross-border e-commerce export business, 70% of the parcels are delivered through the postal parcel logistics mode, which has the characteristics of low cost; international express delivery is fast, and the e-commerce user experience is high; special line logistics companies are shipped abroad by air parcels, and then The goods are distributed by foreign special line logistics companies. This requires strong regional selectivity; overseas warehouses are the choice of some powerful cross-border e-commerce companies, and the storage of goods is set abroad, thereby reducing logistics and distribution time.

Different channel logistics options allow overseas customers to match logistics according to their own needs; for Chinese cross-border e-commerce SMEs, they can also choose operation methods based on logistics costs, which further promotes the development of cross-border e-commerce in China.

2.4. China’s Cross-Border E-Commerce Conducts In-Depth Cooperation Around the World

China is a major importer and exporter of cross-border e-commerce and one of the most important cross-border e-commerce markets in the world. With the vigorous development of cross-border e-commerce, China is actively strengthening coordination and interaction with other countries in the field of cross-border e-commerce, deepening cooperation with other countries in the field of e-commerce, and helping enterprises in various countries reduce trade deficits and form win-win international cooperation. development pattern.

Under the framework of the China and ASEAN Free Trade Area Agreement, China and ASEAN countries jointly build the "China-ASEAN Cross-border E-commerce Platform" (Wang, 2019). Through the form of e-commerce website, the platform connects the operators of ASEAN countries and Chinese consumers, and promotes the online promotion and sales of the featured products of various countries in the Chinese consumer market. Through cross-border e-commerce platforms, Chinese foreign trade companies directly interact with buyers in the Southeast Asian market to understand their purchasing preferences and changes in the international trade pattern. This can effectively help sellers choose suitable products and markets to avoid unnecessary cost consumption due to blind production and placement.

In 2013, China and Central and Eastern European countries signed the Cooperation between China and CEEC and proposed the Belt and Road policy, and China's cross-border e-commerce has also carried out in-depth cooperation with the Central and Eastern European regions. The China-Europe freight trains sail from China to Europe one after another, and also bring cheap and abundant Chinese goods to Europe, benefiting European countries.

3. Many Cross-Border E-Commerce Policies are Formulated to Encourage the Development

China is actively promoting the healthy development of cross-border e-commerce, increasing policy support for cross-border e-commerce through the establishment of additional comprehensive pilot zones for cross-border e-commerce and holding online Canton Fair, and actively addressing the impact of the Covid-19. The overall policy is still favorable to cross-border e-commerce enterprises, further to expand the scope of import and export pilot projects, and increase measures to stabilize foreign trade business affected by the Covid-19. Through combining foreign exchange control and banking services to support the development of foreign-related business, the foreign trade innovation is promoted.

In recent years, the government has continuously introduced new policies and documents to support the development of cross-border e-commerce industry through relaxing the restrictions on cross-border e-commerce retail import and export. The government introduced corresponding policies to ensure the orderly operation of goods in terms of import and export safety, taxation, logistics and after-sales to promote the healthy development of cross-border e-commerce industry. At present, policies related to cross-border e-commerce are frequently introduced to create a good environment for the rapid development of cross-border e-commerce in China.

Table 3: Cross-border E-Commerce Industry Policies

4. China's Cross-Border E-Commerce Products and Countries are Widely Distributed

With the development of Internet technology, global retail e-commerce has burst into vigorous vitality, and sales have increased year by year. Under Covid-19 pandemic, cross-border e-commerce has been pressed the "accelerator button". According to a report released by the World Trade Organization (WTO), the total global trade in goods fell by 5.3% in 2020, but the total global B2C cross-border e-commerce trade increased by 18%. The cross-border e-commerce trade volume did not drop but rose. In 2020, China's global share of cross-border e-commerce will be 26%, making it the world's largest cross-border e-commerce B2C trading market. The main exporting countries are the United States, the United Kingdom, France, Canada, and Germany.

China’s cross-border e-commerce products are rich and popular among foreign customers (Yu, 2019). Among the cross-border export sales products that are popular with foreign customers, 3C electronics account for 18.50%, and the popularity of the products is higher than that of other products. Among them, low-priced mobile phones, mobile phone accessories, tablet computers, computer accessories and other cost-effective products main. The proportion of auto parts, lighting, and security monitoring is relatively small, ranging from 1% to 4%. The low-cost and high-efficiency characteristics of China’s manufacturing industry have been maintained for decades, especially in 3C electronic products, textile and clothing products, etc., which have obvious advantages.

5. Challenges of China's Cross-Border E-Commerce SMEs Under the Covid-19

In February-March 2022, online semi-structured interviews of four managers of Chinese cross-border e-commerce SMEs in eastern, southern, central and western China were taken.

Interviews questions:

a). Company Overview

b). How will the company perform in 2021? Profit or loss?

c). What difficulties did the company encounter in the course of its operation under the Covid-19 pandemic? What's the hardest thing about it?

d). What plans and goals does the company have this year?

e). something else to say

The common problems faced by Chinese cross-border e-commerce SMEs under the Covid-19 are summarized.

6. Cross-Border E-Commerce Products and Countries are Widely Distributed

The Covid-19 has directly caused huge pressure on cross-border logistics. First of all, due to the control of traffic in various countries, the efficiency of logistics is reduced, the speed at which consumers receive goods is slow, and logistics delays are common. With the temporary closure of many countries in Europe and the United States, a large number of overseas express packages are stranded, the user experience is very bad; secondly, the Covid-19 has led to a shortage of logistics staff. A large number of logistics staff can not be on duty, which makes both domestic direct-delivery warehouses and overseas warehouses face the risk of warehouse explosion; finally, the shipping price rose. More than 70% of the SMEs used shipping on the first journey, and the shipping price rose sharply. When the supply exceeds the demand, the price will rise, which makes the cost of cross-border e-commerce SMEs continue to rise.

6.1. Enterprise Capital Chain Under Pressure and Cash Flow Risk Increased

The COVID-19 outbreak has had a serious impact on the survival and development of cross-border e-commerce companies. First, upstream and downstream capital turnover is hindered. The upstream and downstream enterprises cannot effectively connect the business chain and the accounts cannot be paid normally when they are due. The cash flow of enterprises is difficult. Secondly, the orders and contracts signed by foreign trade enterprises cannot be fulfilled normally, so the risk of default increases rapidly and the possibility of credit default is extremely high, so as to the pressure on debt repayment increases. Finally, foreign trade enterprises are also faced with the payment of workers' wages, as well as the payment of fixed expenses such as water and electricity, rent, bank interest, operation and maintenance costs, etc., which further increases the pressure on the capital chain and cash flow burden of foreign trade enterprises.

6.2. Incomplete Supporting Services and Insufficient Production Capacity

With the outbreak of the pandemic at home and abroad, problems such as the lack of anti-risk capabilities of SMEs, different regulatory policies for cross-border e-commerce in various countries, poor logistics channels, and the need to improve the level of implementation of cross-border e-commerce support policies in various regions have emerged one after another. All these restrict the development of cross-border e-commerce.

After the outbreak of the pandemic, the shutdown of production and production in various countries has led to a stagnation of the supply side of export trade. In the context of economic globalization, the production of various products requires the participation of multiple countries, and each country in the complete production chain is a crucial link. In the production model with the international production chain as the main method, all countries play a pivotal role. The spread of the pandemic in one country will inevitably cause the country to stop production and stop production, thereby blocking the entire product production chain. The resulting global the lack of sexual supply will inevitably affect the global cross-border e-commerce trade supply. As a major manufacturing country and a major cross-border trade country, China is bound to be adversely affected by globalization. Any country’s production is affected by the pandemic, which will disrupt the production chain. Therefore, the pandemic has not stopped, and the international production chain will continue to suffer setbacks, which will have a huge impact on the supply side of import and export trade.

6.3. Trade Protectionism Intensifies and Global Industrial Chains Are Hindered

Global trade barriers are currently at an all-time high, and trade protectionism remains an important factor affecting the expansion of international trade. With the global spread of the Covid-19, trade protection measures have increased significantly around the world. The impact of the Covid-19, coupled with trade protectionism, has triggered the spread of anti-globalization and populist thinking, which will further induce or exacerbate economic and trade conflicts, threaten the process of trade liberalization, endanger the stability of global industrial chains and supply chains, and intensify the contraction of world trade. On the one hand, the production of major economies will be halted on a large scale, the global supply chain will undergo significant changes, and the upstream supply chain of our enterprises will be obstructed or even broken. On the other hand, there is an overall decline in demand for overseas goods and huge changes in consumer category demand. As the impact of the Covid-19 outside the country continues, the reduction in travel and social gatherings leads to a decline in consumer demand for apparel and travel products, and the production and major sales of such goods are under enormous pressure on cross-border e-commerce trade enterprises, creating a difficult situation for foreign trade enterprises to effectively resume production and trade supply.

7. Development Strategies for Chinese Cross-Border E-Commerce SMEs in Post-Covid-19

Based on the above evaluation of the situation, the following recommendations can be made for Chinese e-commerce companies, especially SMEs.

7.1. Utilize Technological Innovation to Further Expand Sales Channels and Markets

At present, China’s e-commerce development is in a leading position in the world as a whole, providing important support for the export of technology and services. In the aspects of e-commerce platform online payment, logistics warehousing, express delivery, technical support, etc., it has gradually formed a mature solution and technical standard system, and has the ability to export model experience and technology. The development of online retail in Europe and the United States will accelerate the domestic e-commerce platform model system to go global, and Chinese cross-border e-commerce SMEs can form a new pattern of "Made in China + China Platform + China Service" group to go overseas. Social e-commerce such as live streaming is still in its infancy in Europe and the United States, but it has already flourished in China. Online shopping platforms integrate digital payments, group purchases, social media, games, instant messaging, short videos and online celebrity live broadcasts, and are more dynamic than western e-commerce. After the outbreak of the pandemic, TikTok, the overseas version of Douyin, which is popular all over the world, launched a video shopping cart function to promote models such as short videos of celebrities and goods, leading the trend of international e-commerce.

7.2. Precisely Meet New Market Demands and Implement Diversified Goals Layout

The COVID-19 pandemic has caused the global economy to shrink and consumers' lifestyles to change, thus prompting the emergence of new consumption hot spots. Cross-border e-commerce platforms should reasonably use big data analysis methods to track the hot-selling trend of international commodities and seize new business opportunities. At present, the world’s demand for pandemic prevention medical supplies and household supplies has risen sharply. Some companies can seize this trend to transform and upgrade their cross-border sales products and improve their own sales status. In addition, building a diversified target market layout can effectively deal with the impact of logistics changes on cross-border e-commerce. According to relevant research, under the trend of normalization of the pandemic, logistics efficiency is affected by the distance of the target market. Therefore, the growth of market opportunities in Japan, South Korea and other countries exceeds that of the European and American markets. In the process of development, cross-border e-commerce enterprises should formulate a reasonable market layout and diversify their marketing objectives to flexibly respond to the ever-changing cross-border trade situation.

With the arrival of the 5G era, cross-border e-commerce SMEs should prepare in advance, use virtual reality technology to continuously optimize the display effect of store goods, enhance the purchasing desire of potential consumers, and use big data technology to continuously deepen the exploration of consumer consumption Habits and preferences, carry out precise marketing, and appropriately cooperate with Internet celebrity bloggers in the countries where they are sold, use these Internet celebrity bloggers to bring goods, and continuously improve product sales and conversion rates.

7.3. Actively Develop and Optimize Overseas Warehouses and Various Logistics Channels

Encourage cross-border e-commerce companies to cooperate with Chinese express delivery industry, and encourage domestic express delivery companies to go global, so as to promote the development of overseas logistics business, improve the scale and efficiency of cross-border transportation, and solve problems such as long transportation time, high cost, and opaque information. First, integrate and coordinate the existing logistics system, strengthen the cooperation between different logistics enterprises, build a shared information platform by integrating roads, railways and aviation, and conduct unified and centralized management of logistics, reduce logistics costs, and improve the logistics chain. Second, speed up the construction of international logistics infrastructure, make overall planning for the layout of logistics infrastructure, and reduce logistics nodes.

Through the establishment of overseas warehouses, third-party storage and other logistics infrastructure to meet the needs of overseas logistics turnover. SMEs can co-finance to establish shared overseas warehouses to maintain development needs. Thirdly, encourage cross-border e-commerce enterprises in China to cooperate with overseas warehousing providers, and actively promote the establishment of overseas warehouses of domestic cross-border e-commerce enterprises. More open and transparent, thereby improving customer satisfaction. Finally, to expand the main market and expand overseas logistics services, logistics enterprises must continuously develop their own transportation management capabilities, improve the level of intelligence, make effective connection between various links, and integrate existing resources to increase overseas logistics business expansion efforts to form economies of scale, Establish a large-scale logistics enterprise with high service level and scientific management.

7.4. Make Use of Government Policies to Ease Operating Pressure

During the Covid-19, the government introduced to many policies to support the real enterprises. In terms of funding, cross-border e-commerce SMEs can make use of the policies related to enterprise financing and loans to apply for financing loans from banks and other financial institutions to ease the financial pressure caused by the Covid-19; in terms of operation, they can make use of the cloud mode promotion sessions held by the government to actively promote their enterprises and products online so as to expand their sales and make up for the losses caused by the Covid-19.

Strengthen the information sharing between the government and enterprises, coordinate the establishment of a cross-border e-commerce database, provide the government with systematic, safe and accurate data analysis, provide enterprises with dynamic tracking data on commodity transactions, customs clearance, logistics, etc. tracking service. First, conduct credit evaluation of cross-border e-commerce enterprises, establish a domestic cross-border e-commerce enterprise credit evaluation system that is unified with the international credit system, speed up the construction of credit database, conduct credit evaluation of cross-border e-commerce companies, and carry out credit evaluation results. Publicity to promote the integrity of cross-border e-commerce enterprises. Secondly, establish a cross-border customs clearance platform for warehousing and logistics information, and realize the unified management of commodity flow, logistics, information flow and capital flow through the construction of the customs clearance platform. Thirdly, use information to achieve accurate customer identification, improve the applicability of products through customer demand analysis, and improve the pertinence of corporate marketing through precision marketing, so that companies can better serve customers. Finally, establish a complete information sharing and co-management platform for transactions, payments, logistics, foreign exchange settlement, tax refunds, etc., to interconnect the data and information of customs, inspection and quarantine, national taxation, logistics enterprises, financial institutions and other departments. Audit and risk sharing, improve the service efficiency of government departments while ensuring effective supervision, and fully mobilize the enthusiasm of enterprises to participate while providing more comprehensive services for enterprises, so as to achieve mutual benefit and win-win between the government and enterprises.

7.5. Cooperate with Universities to Cultivate Cross-Border E-Commerce Talents

Cross-border e-commerce compound talents need to master the languages and cultural customs of a variety of countries, and also need to have knowledge of e-commerce, international trade, online payment, logistics management, etc. At present, the corresponding compound talents in China are very scarce and the talent training mechanism Therefore, it is very important to improve the talent training mechanism and speed up the training of compound talents. First of all, enterprises should fully realize the importance of cross-border e-commerce compound talents to the long-term development of cross-border e-commerce enterprises, create a good working atmosphere, encourage enterprise employees to continuously learn new knowledge and skills, and let the old and new New employees quickly adapt to the company. Secondly, to strengthen school-enterprise cooperation, schools set up disciplines, optimize teaching content, and conduct special training for employees in order to improve their overall quality and business capabilities. At the same time, by connecting with enterprises, colleges and universities organically integrate theory with enterprise practice, and train the professional talents needed for enterprises. Third, mobilize social resources, encourage teachers, experts, associations, cross-border e-commerce practitioners and third-party institutions to jointly build educational practice bases, innovate cross-border e-commerce talent training methods, and use a variety of means to flexibly cultivate their needs. Compound talents. Finally, enterprises should appropriately introduce overseas cross-border e-commerce professionals, set up a diversified talent introduction and training mechanism, learn and absorb foreign advanced cross-border e-commerce management experience, and make up for the shortage of cross-border e-commerce talents in China.

8. Conclusions

The Covid-19 has brought cross-border e-commerce companies to face unpredictable crises and brought them new opportunities for development. The emergence of the Covid-19 has hindered people from conducting face-to-face transactions, which has caused a huge impact on traditional foreign trade businesses. Cross-border e-commerce enterprises rely on the Internet to realize the online processing of most of their transactions. Compared with other physical foreign trade industries, the impact of the Covid-19 on the cross-border e-commerce industry is relatively low, and the stagnation of offline transactions has also given cross-border e-commerce companies an opportunity to increase their market share. The Covid-19 has caused certain losses to the cross-border e-commerce industry (Shi, 2020). The Covid-19 has reduced consumers' desire to consume and changed their consumption needs to a certain extent. The delay of cross-border logistics has also become an important problem that needs to be solved urgently for cross-border e-commerce. With the continuous development of computer technology and the standardized operation of the cross-border e-commerce industry, cross-border e-commerce is undoubtedly an important economic format in the future economy.

Cross-border e-commerce breaks the physical space barriers between countries and promotes the transformation of global economic and trade (Zhang, 2019). For enterprises, the opening of the cross-border e-commerce network has broadened the path for domestic small and micro cross-border e-commerce to enter the international market, and promoted the efficiency of multilateral cooperation resources; cross-border e-commerce has made it easier for consumers to purchase goods from other countries. The global economic adjustment and reshuffle under the background of the Covid-19 is a huge test for international market participants. As Chinese cross-border e-commerce SMEs can strive further, only by constantly thinking about and developing new survival paths can we survive and profit in the international market.