China’s Cross-Border Ecommerce Platforms Try to Lure More Sellers With Better Terms

China's major cross-border e-commerce players, such as Alibaba's AliExpress, PDD Holdings' Temu, and fast-fashion retailer Shein, have introduced a semi-consignment model to help merchants deliver goods faster and boost sales. This model allows merchants to delegate logistics to the platform while retaining more control over product pricing and operations. Each platform's version of the model differs slightly, with Shein and Temu targeting merchants with overseas inventory to ensure faster order fulfillment and to enable the sale of larger items that were previously limited due to air freight constraints[para. 1][para. 2][para. 3].

This novel business model emerged as part of a global trend towards offering merchants lower-cost selling opportunities without the burden of logistics. It contrasts with the traditional full-consignment model, where platforms manage almost all aspects of the selling process, including pricing, marketing, processing orders, delivery, and after-sales services. While the full-consignment model requires vendors to transport products to designated warehouses in China, it affords them less autonomy and results in longer delivery times for bulky items[para. 4][para. 5][para. 6].

The semi-consignment model, however, allows e-commerce platforms to diversify services, expand product offerings, and improve logistical efficiency, according to Li Mingtao, chief e-commerce researcher at the China International Electronic Commerce Center. Moreover, this model addresses increasing regulatory scrutiny, particularly in the U.S., where there is significant concern over the exploitation of the "de minimis" rule that allows duty-free imports for goods valued at $800 or less[para. 8][para. 9][para. 10].

In response to this scrutiny, the U.S. Department of Homeland Security announced measures to tighten the inspection of small package shipments to prevent illicit goods from entering the market under de minimis exemptions. To mitigate such risks, Temu has expanded its semi-consignment business from the U.S. to several other countries, including Canada, the U.K., Australia, New Zealand, and parts of the European Union, with further expansion planned for Japan and South Korea[para. 11].

Under the semi-consignment model, merchants can reduce the risk of backlog in overseas warehouses. Pricing under this model is often more profitable as it is benchmarked against higher-priced platforms like Amazon, unlike the full-consignment model, which references lower-priced Chinese platforms. Consequently, many merchants operating on Amazon are also using the semi-consignment model, while others remain cautious, adopting a wait-and-see approach. One Amazon seller has even started using both full and semi-consignment models offered by Temu and Shein to diversify their platform dependency[para. 12][para. 13].

On the other hand, Southeast-Asia-focused e-commerce platforms such as Shopee and Alibaba-owned Lazada, and U.S. marketplace Wish, still rely on the full-consignment model. A Shopee representative mentioned that the platform is currently assessing product popularity in various markets before potentially adopting a semi-consignment model[para. 14].

In summary, the shift towards the semi-consignment model by major Chinese e-commerce players represents an effort to enhance logistical efficiency, mitigate regulatory risks, and provide more profitable and flexible options for merchants. It is a strategic response to evolving market dynamics and regulatory landscapes in cross-border e-commerce[para. 1][para. 2][para. 3][para. 4][para. 5][para. 6][para. 8][para. 9][para. 10][para. 11].