After Years of Talk, Haitao and Black Friday Finally Reached Chinese Shoppers This Year

When it comes to shopping, national borders matter less than they used to

Chinese shoppers now have to get used to two shopping festivals in a single November. A few years ago this was a quiet stretch between the October Golden Week holiday and the new year; today it is the busiest time of the year for e-commerce. From "Double 11" at the start of the month to "Black Friday" at the end, the price cuts urging you to spend have barely stopped.

Black Friday is a traditional American sales season, held on the last Friday of November. On that day, nearly every retailer in the United States, in stores and online, offers its best discounts of the year to pull in shoppers. The news stories about riots, and even people trampled to death in the rush to buy, are about this Black Friday.

Alipay data show that during this year's Black Friday, nearly 50,000 Michael Kors bags were ordered and paid for through Alipay at the online store of the US department store Macy's, more than 150 times the volume of an ordinary day.

And on Black Friday itself, Amazon China, which has been lukewarm for nearly 10 years, sold nine times as many overseas goods as it did on Double 11, thanks to discounts matched to its US site.

Even if none of those sales were yours, it was hard to avoid Black Friday last month. Whether you turned on the TV for the news, watched a variety show on the weekend, caught up on an American drama on a video site, or simply got off the subway or rode an escalator, you saw ads from cross-border e-commerce companies.

On November 27, JD Worldwide ran an ad in WeChat Moments that asked you to play a game of inviting friends to scan a QR code. Yangmatou said it had booked subway ad space in first- and second-tier cities a year in advance, and Xiaohongshu's slogans had long been running in the pre-roll ads of several major video sites.

Meilishuo HIGO paid 338 million yuan to be the title sponsor of the newly launched variety show Running Man. As for the shopping lists the companies placed with WeChat official accounts and Weibo influencers, there were simply too many to count.

Why Is Haitao Taking Off Now?

Haitao, buying directly from overseas websites, is nothing new.

Search interest in the keywords haitao, Black Friday, overseas proxy buying and Double 11 on Baidu's search index

(2012-2015)

In 2012, Double 11, then in its fourth year, still drew less interest on Baidu than Black Friday.

People have long known that you can buy things across borders. It is just that haitao, as they were used to doing it, took some effort.

You needed some foreign language, or had to guess your way through an overseas site's instructions with translation software. Almost nothing you wanted shipped directly to China, and merchants sometimes "cut" orders placed from a Chinese IP address. Even if an order went through, you still had to open an account with a freight forwarder and wait for it to relay the package to China.

Delivery often took so long that you forgot what you had bought. And once the goods finally reached China, you still had to worry about getting them through customs. With luck, the package arrived in a little over a month; without it, what arrived might be a duty notice from customs.

"A few years ago I browsed Amazon too. The prices were good, but you had to pad the order to reach the minimum, fill in an English address, and then deal with a forwarder. I just didn't have the time," said Ouyang, a reporter and the mother of a three-year-old, who has always used baby products, skin care and bags brought back from abroad. She told QDaily: "I'd rather pay more and use a proxy buyer." Detailed haitao tutorials can be found everywhere in shopping communities and on social networks, yet only a minority of people actually do it themselves.

Now haitao takes a few taps on a phone screen. Once you link your Chinese and US accounts, buying from US Amazon is almost no different from shopping on Amazon China: you fill in customs clearance information and wait a few more days. Other haitao services are even easier. You don't need a credit card; Alipay or WeChat will do.

This year Ouyang finally did haitao herself. "I bought more than on Double 11. I placed 7 orders on Memesou, 4 on Yangmatou, 4 on Xiaohongshu, and some on Kaola too, two or three, I don't remember exactly, and not everything has arrived yet." Her only condition for the interview was a pseudonym: "I don't even dare bring it all home at once. I can't let my husband know (how much I bought)."

The Black Friday boom is the result of haitao going mainstream over the past year.

The shopping-guide community SMZDM began recommending haitao deals in November 2010. It was then a newly launched website with only a handful of employees, and it turned the Black Friday discounts it collected from overseas shopping sites into a special feature.

This year, the site, now an important gateway to e-commerce, prepared for Black Friday early. As soon as Double 11 ended, SMZDM switched its app and website to a Black Friday theme and launched a bounty program for deal tip-offs.

On Black Friday itself, nearly all of its editorial team of more than 100 people worked overtime, with days stretching to 20 hours. The administrative department booked hotel rooms near the office so they could rest, and the building the company moved into this year has a rest area set aside for "big year-end events" like this one.

From the 27th to the 30th, SMZDM published more than 2,500 promotional posts covering 236 haitao merchants, 40 of which had contacted it before the 27th to supply promotional information.

In an earlier interview, Meng Jian, SMZDM's overseas business director, told QDaily: "We originally hoped users would try haitao on their own. The community has a great many detailed tutorials, and this year our Black Friday page also has a beginner's guide. But because the barrier is high, many users still won't do it themselves. This year, though, more cross-border e-commerce companies and technology-driven proxy-buying companies have joined in, and that lets novices start trying it."

Over five years, the volume of haitao tracked by SMZDM alone grew nearly 40-fold. In the first half of 2015 it grew 147% year on year, far above the 46% average for domestic e-commerce. On Black Friday itself, growth reached 171%.

Black Friday Did Not Catch On Overnight

The shopping day known as Black Friday dates to 1939, when several of the largest American retailers sent an urgent request to President Franklin D. Roosevelt asking him to change the date of Thanksgiving. Thanksgiving had fallen on the last day of November, which left merchants too little time to run their seasonal sales before Christmas.

The president went along with the retailers' request, which helped cement the post-Thanksgiving buying frenzy: what we now call "Black Friday," America's big Christmas shopping day.

For the sake of retailers, President Franklin D. Roosevelt moved Thanksgiving a week earlier. Photo: Associated Press

Black Friday was originally a big day for physical stores, until e-commerce joined in and created "Cyber Monday" as well. US data for this year show that on Black Friday, the number of people shopping online even edged past those shopping in stores, reaching 103 million.

But this has little to do with the Black Friday we are talking about. Yangmatou's "Black Friday" promotion began on November 20, the Friday before Black Friday.

"Users aren't really sure which day Black Friday is anyway, so we just did a double Black Friday. What we want is to spread the idea of shopping overseas," Yangmatou CEO Zeng Bibo explained at an earlier launch event.

China's Black Friday, or, in the various companies' slogans, red, purple, pink or any-color-you-like Friday, long ago lost its original meaning. As Yangmatou CMO Cai Hua told QDaily: "E-commerce needs a timing, a moment to launch the concept of overseas shopping."

A report from Carat shows that in 2015, advertising spending by vertical haitao platforms such as Meilishuo HIGO, Yangmatou and Xiaohongshu grew 145% over the previous year, with conventional paid advertising reaching 330 million yuan.

Data source: Carat

Over the past year or so, every link in cross-border online shopping has changed. "Cross-border e-commerce" has stayed hot from last year into this one: Tmall Global, JD Worldwide, Amazon Global Store, Jumei, Xiaohongshu's "Red Star Friday," NetEase's Kaola... While these companies fight for the domestic market with round after round of diaper and baby-formula subsidies, they are also fighting for overseas merchants.

The big companies that have moved into haitao one after another now generally offer three models: direct procurement, direct mail, and shipping from bonded warehouses.

• Direct procurement

Direct procurement is traditional bulk import trade. All such goods must pass inspection and quarantine and carry Chinese labels before they can be sold.

Amazon's "direct import" program, for example, uses its supplier networks in the United States, Australia, Europe and elsewhere to buy goods in bulk at the source, ship them to China, clear customs, and store them in warehouses until they sell. Amazon handles all of it: shipping to China, customs clearance, sales, even Chinese-language after-sales support. The largest category is alcohol, which is expensive to ship one bottle at a time by direct mail.

Imported fruit that Tmall Global and fresh-food sites such as Fruitday buy from overseas also counts as direct procurement.

• Direct mail

Direct mail is haitao as people first knew it: you order from an overseas shopping site, and the goods reach you by international shipping. Haitao used to be a hassle precisely because the delivery process was hard to control. Today every haitao company that does direct mail has simplified the steps in between.

Take Amazon: an item ordered on US Amazon ships directly from US Amazon to China, clears customs in a batch, and is then sorted and delivered by Amazon's operations center in China.

Memesou, which has just been through its second Black Friday, is a technology-driven proxy-buying site. It scrapes real-time prices from dozens of US e-commerce sites, so users do not need to register on each one. After a user orders and pays on Memesou, Memesou takes over the rest: placing the order on the official site, tracking shipping, and handling after-sales service. Users can pay the way they are used to and never need to contact a freight forwarder.

Yangmatou, which runs a buyer-platform model, owns its own logistics arm, Beihai International Logistics. Buyers in the United States only need to send goods to Beihai's depots in New York and other cities; in other countries and regions, Yangmatou works with local postal services for international shipping. Yangmatou co-founder Cai Hua told QDaily that during the Black Friday promotion it was running more than 40 charter flights a week from the United States to China.

Whether through Amazon's unified global logistics system or, like Yangmatou, their own warehouses in overseas cities with heavy cargo traffic, the many cross-border e-commerce companies that rely mainly on direct mail must have their own strengths in logistics.

• Shipping from bonded warehouses

Goods held in a bonded warehouse are temporarily exempt from import duties and need no import license; they clear customs and pay duty only when formally imported. Over the past year or so, more and more cross-border e-commerce companies have chosen to ship from bonded zones, which offers both fast delivery and low cost.

Under this model, the e-commerce platform, or an overseas third-party merchant, stocks goods in a bonded zone in advance. Once a user places an order, the goods are declared to customs and shipped directly from a bonded warehouse in Hangzhou, Ningbo, Guangzhou or another Chinese city, so delivery is as fast as ordinary domestic online shopping. Tmall Global, the self-operated part of JD Worldwide, Mia, NetEase Kaola, Xiaohongshu and others mostly use this approach. It saves the upfront investment of bulk import trade while still getting goods to users quickly.

Changes in customs policy also play a part. Goods in a bonded warehouse are only in temporary storage. When Chinese consumers buy overseas goods through an e-commerce platform, the goods count as items for personal use, and customs levies the postal tax on personal articles; tax bills below 50 yuan are waived, which gives haitao goods on this route a price advantage.

Haitao tutorials in shopping communities used to include a section on "how to avoid customs duty," and forums were full of people grumbling that they had been "unlucky and got taxed." Now both direct mail and bonded shipping have become regular channels, and users are used to prepaying any tax due when they pay for their order. For customs, what used to be random income has become standard income.

Bonded warehouses mean merchants can get more kinds of goods to consumers quickly. The challenge for haitao companies is therefore to persuade as many overseas brands as possible to work with them. When JD CEO Richard Liu personally led teams to South Korea, France and Australia in 2015 to negotiate partnerships, it was for exactly these bonded-warehouse goods.

Cross-Border E-Commerce Has Blurred National Borders

"This year every e-commerce company went into cross-border e-commerce, whether through free trade zones or cross-border physical stores; the big platforms and the startups are all doing it," said Yangmatou co-founder Cai Hua. He believes the haitao enthusiasm that built up over the past year made this year's Black Friday so lively.

Yangmatou's single-day sales on last year's Black Friday topped 10 million yuan; this year that record fell within the first ten minutes of the first day. "The flash-sale items go in microseconds, with 700,000 users fighting over one," Cai Hua said. "Every time you refresh the back end, which is every second, sales may have gone up by 200,000 or 300,000."

As SMZDM's overseas business director Meng Jian told QDaily, this Black Friday drew the most users and merchants of the five the site has been through. Shoppers in 287 third-tier, fourth-tier and smaller cities took up haitao, and the average order value across haitao users reached 877 yuan, compared with just over 600 yuan during Double 11.

Whether through direct procurement, direct mail or bonded warehouses, the freight forwarder has now disappeared from the haitao process as a middleman. Or rather, the forwarding step, once users' biggest headache, has been taken over by the new cross-border e-commerce companies.

Forwarders are not the only middlemen to disappear.

Before online retail spread, haitao was unthinkable. Before overseas goods crossed the ocean to reach shoppers, a brand had to license an export trading company, and the goods then went through import trade, clearing customs declaration, inspection and duty payment, before finally landing in a store near you. Every one of these steps involves layer upon layer of agents, and from the start of an import deal to the day you can buy the item on a shopping trip can take a year or two. That is why something that costs a few yuan in a foreign supermarket can cost several times, even dozens of times, more in an import supermarket: it has passed through too many distributors and agents along the way.

E-commerce seems to have made all of this simple. Users browse online, save the items they like, order and pay on the official site or through a cross-border e-commerce company, and wait for delivery. The only extra cost is a week or two of shipping time.

Personal consumer goods were hit first and hardest, but even the luxury industry is showing the same trend.

As buying abroad becomes routine, brands' China pricing is already changing. Early this year Chanel cut its prices in China by 20%, and Dior, LV, Cartier and others soon followed. Recently Gucci's Shanghai flagship opened public discounts of up to 50% off, the second time in a year that the luxury brand has run a big discount in China.

The rise of haitao will affect more than how much money each consumer saves. When Amazon sells American Calvin Klein to Chinese consumers at a half or a third of the China counter price, and when Macy's sells 50,000 Michael Kors bags in a few days to first- and second-tier, even third- and fourth-tier Chinese cities at prices that no domestic sale can match, how will these brands' stores in China keep selling?

A brand's biggest rival in China is no longer other brands but its own colleagues in the United States. The impact of haitao on multinational companies has only just begun.

Cover image from oliverwillis