CHINA. A new e-commerce law in China will go into effect on 1 January and will further regulate the country’s online luxury sales market, writes Jing Daily, a content partner of The Moodie Davitt Report.
The new rules are generally being interpreted as positive for the sector, but they will certainly change the way brands do business in China.
The rules will also negatively impact daigou buying, according to Jing Daily. Daigou buy goods abroad (predominantly cosmetics but also a wide range of accessories and other premium and luxury goods, as well as commodity items such as milk powder) and resell them (often through well-organised networks) on the Mainland. Those goods cost less and don’t incur China’s high import tariffs for customers in China.
“Daigou have increasingly been promoting themselves on social media outlets like WeChat, but they’ll now come under scrutiny for their undocumented practices,” said Jing Daily.
“Aside from regulating daigou, the law also raises the tax exemption limit for cross-border purchases. The single purchase limit will increase from US$288 (RMB2,000) to US$720 (RMB5,000), and the yearly purchase amount increases from US$2,900 (RMB20,000) to US$3,780 (RMB26,000). Cross-border purchases under the new limits will be exempt from duties and receive a -30% discount on consumption tax and VAT.”
In an article that can be read here, Jing Daily spoke to experts in the fields of e-commerce and influencer marketing, as well as some of the sales platforms themselves, to find out what impact the new law will have on luxury brands.
In the short term, the crackdown on daigou might cut into an important revenue stream for luxury brands, but in the long term, it will protect the way goods are presented and marketed in China, it said. “And even with a shrinking daigou market, this law won’t necessarily keep consumers from seeking other methods to purchase luxury goods.”
Part of the services daigou provide, such as price and style consultation, could be assumed by e-commerce platforms, “provided they can insert these social elements into their businesses”.
One of the primary goals of the new e-commerce law is to standardise cross-border trade, according to Jing Daily. “In a sense, the government is calling for e-commerce platforms to act as gatekeepers to prevent fraudulent activity.”
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*This article was originally published by the much-respected JING DAILY, a Moodie Davitt Report content partner.