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The Guangzhou Nansha Free Trade Zone: Funsens’ Cross-border Direct Purchase and Experiential Center

Allied to the cross-border e-commerce platform Funsens.com, Funsens Nansha Overseas Products Direct Purchase and Experience Center (“Funsens Experience Center”), opened for business in the Nansha Area of Guangdong Free Trade Zone (GDFTZ) on 1 May 2015. Together, the two arms of the business create an O2O business model: “offline experience centre + online purchase platform”. Located in Binhai Juncheng Shopping Mall, Funsens Experience Center covers an area of about 10,000 sqm. Currently over 30 enterprises have set up business there, offering more than 10,000 foreign products, most of which are personal consumer items.

At present, most experience stores allied to cross-border e-commerce platforms are exclusively for displaying products, but at Funsens Experience Centre each store is divided into an “overseas product display area” and a “duty-paid area”. In the “duty-paid area”, consumers can take goods away immediately after purchasing them. Stores in the centre are either categorised by country/territory of origin or by product type, and are also larger in scale and packed with more features than other stores of this kind.

Photo: Funsens Experience Centre.
Funsens Experience Centre.
Photo: Funsens Experience Centre.
Funsens Experience Centre.
Photo: Funsens Experience Center is located on the 2nd and 3rd floors of a shopping mall.
Funsens Experience Center is located on the 2nd and 3rd floors of a shopping mall.
Photo: Funsens Experience Center is located on the 2nd and 3rd floors of a shopping mall.
Funsens Experience Center is located on the 2nd and 3rd floors of a shopping mall.

 

“Overseas products display area” vs “Duty-paid area”

Stores in Funsens Experience Centre display their products in two areas, namely an "overseas products display area" and a "duty-paid area". To shop in the experience centre, consumers must register in advance as members of Funsens.com and pay for goods from these two areas separately.

Photo: Products in the overseas products display area
Products in the overseas products display area: consumers must take a “product information card" to the cashier to place an order. After transactions are completed via Funsens.com, goods are delivered to consumers.  
Photo: Products in the overseas products display area
Products in the overseas products display area: consumers must take a “product information card" to the cashier to place an order. After transactions are completed via Funsens.com, goods are delivered to consumers.  

When consumers purchase products on-site from the “overseas products display area”, they must take a “product information card” for each product to the cashier to place their orders and settle payment. The staff will verify a consumer’s ID card, and then the consumer can pay by credit card or through online banking. After completion of these procedures, consumers do not collect their goods on site, but must wait until the product and payment information have been sent to the Customs and the Inspection and Quarantine Bureaus by Funsens.com. Upon customs clearance, Funsens.com will arrange delivery of the goods. Generally, it takes only two to three days for the goods to be delivered to consumers’ homes. Compared to overseas online shopping, goods delivery is much faster, as products ordered from the "overseas products display area" are already stored in bonded warehouses in Guangzhou.

If consumers purchase products from the "duty-paid area” in the experience centre, they can take the products straight to the cashier and pay for them. After a shopper's ID card is verified by the cashier, the transaction is completed and the goods can be taken home. It is worth noting that only credit cards, online payment and mobile payments are accepted for on-site purchase in the “duty-paid area”. In other words, payment in cash is not allowed, which may cause inconvenience for those who have no credit card or means of online payment. At Funsens Experience Centre about 70% of goods are "duty paid", allowing immediate collection of goods straight after payment. The other 30% are "overseas products" for showcase purposes only.

Advantages of shopping via cross-border e-commerce platforms

Photo: Products in the duty-paid area: consumers can take products straight to the cashier
Products in the duty-paid area: consumers can take products straight to the cashier, then take them away after payment.
Photo: Products in the duty-paid area: consumers can take products straight to the cashier
Products in the duty-paid area: consumers can take products straight to the cashier, then take them away after payment.

Compared to traditional foreign trade importation, cross-border e-commerce platforms bypass dealers, wholesalers and retailers and can therefore reduce the prices of imports. Compared with overseas online shopping and overseas agents, cross-border e-commerce platforms are under the supervision of Chinese Customs, the Inspection and Quarantine Bureau and other relevant government departments. Therefore, if consumers have any doubts or complaints about the quality or authenticity of the goods they purchase, they can trace their origin or simply return goods via these platforms. According to Announcement No. 43 on the Adjustment of Management Measures for Inward and Outward Personal Postal Articles, issued by the General Administration of Customs in 2010, import duties, referred to as personal postal articles tax, are payable on items imported personally by post. Chinese Customs requires consumers purchasing imported goods through cross-border e-commerce platforms to confirm their own ID. Under the principle of “reasonable quantity for personal use”, for any single order of more than one item with a total value below Rmb1,000, postal articles tax is payable for customs clearance. If the value exceeds Rmb1,000, the goods will have to clear customs as general trade imports, requiring payment of import duties and VAT. For a single order of an indivisible product (such as a baby pram or handbag), if the value exceeds the Rmb1,000 limit but Customs determines it is for personal use only, the product can be regarded as a personal article and postal articles tax is payable for customs clearance. In general, prices offered on cross-border e-commerce platforms are more favourable than those through traditional foreign trade and overseas shopping agent.

 

Table: Example of diapers costing Rmb100 per pack
Table: Example of diapers costing Rmb100 per pack

 

Store features at Funsens Experience Center

Funsens Experience Center is located in Binhai Juncheng Shopping Mall in GDFTZ Nansha Area. Adjacent to Jinzhou Station, on Guangzhou Metro Line No. 4, it is within 1.5 hours by metro or car from the urban areas of Guangzhou. The centre has attracted not only local residents but also consumers from surrounding cities such as Dongguan and Foshan. Stores in Funsens Experience Center are grouped by country/region or according to product type, so that the display of products is distinctive at a glance. For example, themed stores for South Korean imported goods offer a variety of specialty food and skincare products, including kimchi, laver, ginseng and beauty masks. Compared to some experience stores for imported goods, where only a few items, photos and pictures are on display, Funsens Experience Center is much larger in scale and packed with more features. Funsens is now preparing to build a second phase of the Center. Under an “Exotic Shopping Street” theme, this will have an operating area of 30,000 sqm and will be complemented by catering and entertainment facilities to enhance the overall consumer experience.

Photo: A store with South Korean imported goods at Funsens Experience Center.
A store with South Korean imported goods at Funsens Experience Center.
Photo: A store with South Korean imported goods at Funsens Experience Center.
A store with South Korean imported goods at Funsens Experience Center.
Photo: A store with maternal and baby products at Funsens Experience Center.
A store with maternal and baby products at Funsens Experience Center.
Photo: A store with maternal and baby products at Funsens Experience Center.
A store with maternal and baby products at Funsens Experience Center.

 

Requirements and costs for enterprises

Any Hong Kong company interested in setting up shop in Funsens must first register as a local business in Nansha. Overseas products must be filed with the authorities in advance. Only with approval from the Customs and the Inspection and Quarantine Departments can the goods be shipped to the cross-border logistics centres designated by Nansha Customs. Products can only be sold only through Funsens Experience Center and its cross-border e-commerce platform Funsens.com. Orders from consumers must be sent for customs clearance via Funsens’ system. The goods are then shipped from the bonded warehouse and delivered by courier companies to consumers. Unlike with other cross-border e-commerce platforms, companies joining Funsens.com must first open a physical store at Funsens Experience Center in order to operate under the O2O business model of “offline experience centre + online purchase platform”.

As far as cost is concerned, Funsens mainly operates by charging rentals from the experience centre, service charges from Funsens.com and logistics management fees for goods shipment out of the bonded warehouse, as well as packaging fees. In terms of payment settlement, Funsens adopts consolidated cashier management and settles at periodic intervals. Due to the special nature of cross-border trades, unless there is a quality problem, Funsens does not support “return or exchange of goods in seven days without reason”. If there are after-sale problems, Funsens’ customer service department will assist companies and consumers in dealing with them. At present, over 30 companies have set up shop in Funsens, of which the majority are domestic import-export companies and two are Hong Kong companies, namely Hon Kee Noodle and the Wing Wah Group. To attract more companies and brands, premium companies are offered “Five Zero Incentives”: zero entry charge, zero rental, zero management fees, zero promotion fees and zero commission. Premium companies meeting necessary criteria will be rewarded via certain financial incentives.

Diversifying the product range on cross-border e-commerce platforms

Currently, products in cross-border e-commerce are mainly baby products and daily use items. Only a few cross-border e-commerce platforms offer digital electronics and luxury products. As more and more consumers shift from overseas online shopping and proxy shopping to cross-border e-commerce platforms in purchasing foreign products, it is anticipated that products offered by cross-border e-commerce platforms will become more diverse. Although cross-border e-commerce experience stores mainly cater to local residents and those from surrounding cities, consumers from the whole mainland can also shop on cross-border e-commerce platforms, meaning they have the potential to reach consumers from across the country. Hong Kong may therefore envisage huge opportunities to expand their B2C consumer business via cross-border e-commerce platforms.

Content provided by Picture: Alice Tsang
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