Monday, January 04, 2016

Online platform helps foreign firms, but obstacles remain - Ben Cavender

Ben Cavender
Ben Cavender
Tmall Global of Alibaba offers international sellers since 2014 a platform to sell their products directly to Chinese consumers, and offers advantages like lower import rates. But, warns retail analyst Ben Cavender in Fortune that does not mean selling in China has fundamentally become easy.

Fortune:
Tmall offers U.S. companies a portal to Chinese consumers. But selling on the site is only half the battle. “It’s incredibly difficult to set up operations [in China], even if you are a large brand,” says Cavender, the analyst. Like all foreign companies, Tmall partners must establish a Chinese-licensed business unit and a Chinese bank account. Paperwork to obtain licenses and permits must be filed in person, often with multiple agencies. Even opening a bank account can take months. Consequently, big U.S. companies that had already invested in China infrastructure—Nike NKE -1.19% , P&G, Gap GPS -2.14% , and, yes, Amazon are prominent examples—have taken advantage of Tmall. But for others the bureaucracy remains daunting... 
Perhaps most appealing: Companies that import through Tmall Global can pay lower taxes. Alibaba has worked with China’s government to create “bonded” warehouses in four cities. Goods shipped through these points aren’t subject to standard import duties. Some aren’t taxed at all; others are taxed at discounted rates of 10%, and only after shoppers purchase them. This compares with the 30% to 40% wholesale tax rates standard for such brands, says Cavender. It’s a deal the Chinese government was willing to offer, Alibaba officials say, because it meant consumers would spend more money at home.
More in Fortune.

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