Chapter 6

What No One Tells You About Third-Party Service Providers

What No One Tells You About Third-Party Service Providers

The numbers of opportunities available through cross-border e-commerce is limitless, and as one of the largest CBEC market in the world, China, have provided businesses and brands various alternatives to enter the market. China has a population of over 1.3 billion people and over billions of dollars. One of the advantages CBEC have in store for foreign businesses is the dispensable Chinese business entity to sell goods from abroad or partnerships with trading companies. Although the rise of CBEC have allowed business to avoid the necessity of a Chinese business entity, the market have created opportunities for third part service providers.


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What are Third-Party Service Providers

Third-party service providers are local Chinese agencies that offer expert services to foreign businesses entering the CBEC market. There are various third-party service providers that offer different type of services, however, these third-party service providers exist to provide businesses with a ease of access and operations on day to day basis.


Many of the large CBEC platforms such as Tmall Global, JD Worldwide only accept foreign merchants to sell goods on the platform only if they cooperate with approve third party service providers. There are third-party service providers that are specifically certified by the CBEC platforms based a set of guidelines and requirements.


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Third-party service providers can assist foreign businesses with warehousing, logistics, bilingual staff employment, payments and more. These providers also offer other services relevant to CBEC, however options may be limited based on the service providers the business work with. Services may include, customer relationship management (CRM), data analysis, digital marketing, legal solutions and others. However, foreign businesses should keep in mind that there are numbers of third-party service providers that will provide you with a variety of services, but many of these third-party service providers only provide a limited number of services of expertise. Thus, foreign businesses are highly likely to be involved with more than one third-party service providers.


Benefits of TPS

By charging a certain amount of service fees, which can be monthly, annually, commission-based, and/or fixed, the third-party service providers can help business quickly emerge into the market with ease. The local third-party service providers are highly likely to have a higher level of understanding of the current market, policies, and communication to better serve consumers than the foreign business themselves, creating a higher quality experience for the consumers. Additionally, by finding the most suitable third-party service providers, will provide businesses with the highest benefits as the service providers can meet the demands based on branding, brand image, and systematic efficiency.


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Factors To Consider

In order to find suitable third-party service provider(s), there are some factors the business must consider. The first factor is the type of CBEC marketplace the business will be involved in.

Based on the business model, such as B2B, C2C, B2B2C, there are different third-party service providers that excel and have higher expertise in that matter.

The second factor is the platform the business will be involved in after deciding on the business model and marketplace. Different platform may have different requirements as to which third-party service providers are used. Additionally, some platforms only permit certified third-party service providers to be used. For example, some third-party service providers may deal with only Tmall Global, and there may be others that are certified by JD Worldwide.


Third factor that businesses should research on before finalizing a partnership is the third-party service provider themselves. Third-party service providers often offer various services but may not be experts in all solutions provided. Thus, businesses should research on the available third-party service providers based on the business model and platform.


The fourth factor is the goods and services the foreign business is merchandising. For example, third-party service providers that experienced in handling FMCG may have different solution than those experienced in clothing goods. Some e-commerce platform may also have a list of certified third-party service providers based on the product category to help narrow down a few excellent choices.


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The fifth factor businesses have to consider the location that services are offered by third-party service providers. CBEC pilot zones have a specific set of policies that are required to be followed by all parties involved and based on the experiences of the provider within that specific pilot zone, the efficiency of the business can be impacted for logistic solutions.


Lastly, the fees of third-party service providers. In the introduction to third-party service providers, this article has mentioned the different types of fees third-party service providers may charge. This fee is dependent on the number of services the third-party service providers is providing for the business. However, on average, a well-rounded third-party service provider may charge a range between 20,000 RMB to 100,000 RMB monthly along with a commission or revenue share. Based on the experience, reputation and company size, the numbers can vary. This number may seem high for CBEC, however, third-party service providers gives companies an insight on efficient and systematic day to day operation that can help business grow rapidly. Keep in mind that some third-party service providers may also be able to compromise based on the business offer in terms of pricing, thus, businesses should directly contact providers in terms of fees and costs.


Potential Challenges and Risks


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The convenience and efficiency third-party service providers can bring to CBEC have caused an uprising in this field. Both CBEC market size and third-party service providers are rapidly growing in numbers, leading to potential risks. With the rapid growth of third-party service providers, there are limited regulations and policies that can be held against third-party service providers to initiate in regulated certifications deemed trustworthy. Some third-party service providers are lacking in trustworthy records, experience and certifications. However, certifications are not immune to low quality services and consistency.


Some third-party service providers may commit less effort in businesses that are growing slowly than those growing rapidly if revenue sharing is involved. Additionally, depending on the type of services provided by the company, there are alternate strategies that third-party service providers may utilize to meet the business demands. For example, a business targeting traffic may receive traffic target results, however, these can be non-converting traffic received through business strategies from the providers. There are also cases where unreliable third-party service providers that release client data or IPR to others. Thus, foreign businesses should highly prioritize extensive research into trustworthy third-party service providers to avoid any consequences and damages to the business.


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