Here’s How eBay Is Looking To Expand Into The Chinese Market

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While its first attempt to make a mark in the Chinese e commerce market was not successful, eBay (NASDAQ:EBAY) is now looking to re-enter the market by tapping into the changing trends in Chinese e-commerce. With an increasing number of Chinese consumers preferring foreign products, the government is incentivizing cross-border trade and encouraging e-commerce platforms to support this initiative. It is promoting zones which give benefits to companies in terms of tax breaks and faster imports, potentially leading to lower costs. eBay recently entered into an agreement with one such zone – Ningbo, a city in China – to help develop the e-commerce trade in the region. Amazon and Alibaba have already entered into similar arrangements, and this agreement will allow companies in Ningbo to utilize eBay’s platform for cross-border trade. Per the agreement, the two parties will work together on talent training for cross-border trade, collaboration with local government, B2C industry development and logistics. This arrangement can give eBay an entry to the growing Chinese e-commerce market, which is now focused on foreign products. However, Chinese e-commerce giant Alibaba is already actively pursuing the market for foreign products in China through its Tmall platform, where several luxury foreign brands sell their products. While eBay faces strong competition from formidable players in this region, the growing demand for foreign products and government incentives around cross-border trade could give the company a new platform to establish itself in the region.

Capturing The Growth In Cross-Border Commerce In China

According to eMarketer, by 2020 a quarter of the Chinese population (amounting to more than half of all digital buyers) will be shopping either directly on foreign-based sites or through third parties. In 2016, the estimated purchases by Chinese consumers from foreign nations were pegged at nearly $86 billion according to eMarketer.  Cross-border goods sold by the B2C (business to consumer) channel are likely to grow in the future as consumers prefer platforms that are more professional and organized. We believe eBay is well-poised to capture this growth and consequently increase the number of transactions on its platform. While its earlier foray into China did not succeed, eBay has transformed since then and worked on simplifying its platform to benefit both buyers and sellers. As Chinese consumers look for an organized and reliable platform to purchase foreign goods, eBay can fit this bill well and find favor with these customers. While Alibaba remains a formidable player in the region with a dominant market share, consumers will continue to look for other alternatives for better deals and service. eBay can fill that gap and capture a decent share in the growing Chinese e-commerce market. If the company is able to capture a significant number of active users in the region, it can lead to an upside to our price estimate for the company.

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As eBay looks to drive revenues, the growing cross-border e commerce in China can prove to a boon to its second innings in the region.

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