Do or Die: Go Digital or Die - Thai Jewelry Business to China Market

        In the rapidly evolving landscape of international trade, Thai jewelry businesses face a stark reality: go digital or risk obsolescence. The Chinese market, with its vast potential and tech-savvy consumers, presents both an immense opportunity and a formidable challenge for Thai jewelers.

        The traditional approach of relying solely on physical stores and trade shows is no longer sufficient. Chinese consumers, particularly the younger generation, are increasingly turning to e-commerce platforms and social media for their luxury purchases, including jewelry. The COVID-19 pandemic has only accelerated this shift, making digital presence not just an advantage, but a necessity.

        Cross-Border E-Commerce (CBEC) has emerged as a game-changer, offering Thai jewelry businesses a direct route to Chinese consumers. With lower entry barriers and reduced tariffs, CBEC provides an unprecedented opportunity to tap into the world's largest consumer market. However, this digital gold rush comes with its own set of challenges.

        To survive and thrive, Thai jewelers must embrace a comprehensive digital strategy. This includes:

1. Establishing a strong presence on popular Chinese e-commerce platforms like Tmall Global and JD Worldwide.

2. Leveraging social media and influencer marketing to build brand awareness and trust.

3. Implementing advanced technologies like AR/VR for virtual try-ons and 3D product visualization.

4. Utilizing data analytics to understand and predict Chinese consumer preferences.

5. Adapting to mobile-first shopping experiences, as most Chinese consumers shop via smartphones.

        Crucially, Thai businesses must also capitalize on emerging platforms that are reshaping the Chinese digital landscape:

- TikTok E-Commerce: The short-video platform's foray into e-commerce offers a unique opportunity to showcase jewelry through engaging, viral content. Its seamless integration of entertainment and shopping appeals strongly to younger consumers.

- Little Red Book (Xiaohongshu): This lifestyle-focused social media and e-commerce hybrid is a powerhouse for luxury and beauty products. Its user-generated content model allows for authentic product reviews and lifestyle integration, making it ideal for building trust and desire for high-end jewelry.

        These platforms offer immersive, content-rich environments where Thai jewelers can tell their brand stories, showcase craftsmanship, and connect with Chinese consumers on a more personal level.

        The stakes are high. Those who successfully navigate this digital transformation stand to gain a significant share of China's burgeoning jewelry market. On the flip side, businesses that cling to outdated methods risk being left behind, unable to compete in an increasingly digital marketplace.

        For Thai jewelry businesses, the message is clear: digitalize or risk decline. The future of the industry lies in bits and bytes as much as in carats and cuts. In this new era, a strong online presence across diverse platforms is not just a competitive edge—it's a lifeline to continued relevance and success in the lucrative Chinese market.

        The choice is simple yet crucial: Go digital or die. The clock is ticking, and the time to act is now. Thai jewelers must embrace these digital platforms, including TikTok and Little Red Book, to create engaging content, build brand loyalty, and drive sales in the ever-evolving Chinese market.

        To analyze the pros and cons of the Cross Border E-Commerce (CBEC) policy and implementation for gems and jewelry trading from Thailand to China, let's break it down into several aspects:

Pros:

1. Market access: CBEC provides Thai jewelry businesses easier access to the vast Chinese consumer market without the need for physical stores in China.

2. Lower entry barriers: Reduced tariffs and simplified customs procedures make it more cost-effective for Thai businesses to enter the Chinese market.

3. Direct-to-consumer sales: CBEC allows Thai jewelers to sell directly to Chinese consumers, potentially increasing profit margins by cutting out intermediaries.

4. Faster market entry: The streamlined process allows for quicker market entry compared to traditional import methods.

5. Data insights: E-commerce platforms provide valuable data on consumer preferences and behavior, helping Thai businesses tailor their offerings.

Cons:

1. Complex regulations: Chinese CBEC policies can be complex and subject to frequent changes, making compliance challenging for Thai businesses.

2. Limited product categories: Not all jewelry items may be eligible for CBEC, restricting the range of products that can be sold.

3. Competition: The lower entry barriers also mean increased competition from other international jewelry brands in the Chinese market.

4. Logistics challenges: Ensuring timely delivery and handling returns can be complicated in cross-border transactions.

5. Currency fluctuations: Exchange rate volatility between Thai Baht and Chinese Yuan can affect pricing and profitability.

6. Cultural differences: Misunderstanding Chinese consumer preferences or cultural nuances could lead to marketing missteps.

7. Potential for fraud: The online nature of transactions increases the risk of fraudulent activities or counterfeiting.

Mitigation strategies for the cons:

1. Regulatory compliance: 

- Partner with local Chinese experts or consultancies to stay updated on CBEC regulations.

- Invest in training staff on Chinese CBEC policies and procedures.

2. Product diversification: 

- Develop a range of products that fit within CBEC-eligible categories.

- Consider creating China-specific product lines that comply with regulations.

3. Competitive strategy: 

- Focus on unique Thai designs or special cut gemstones to differentiate from competitors.

- Invest in brand building and marketing to create a strong identity in the Chinese market.

4. Logistics optimization: 

- Partner with experienced cross-border logistics providers.

- Consider using bonded warehouses in China to reduce delivery times and simplify returns.

5. Financial risk management: 

- Implement hedging strategies to mitigate currency risks.

- Consider pricing in Chinese Yuan to simplify transactions for customers.

6. Cultural adaptation: 

- Conduct thorough market research on Chinese consumer preferences.

- Collaborate with local Chinese designers or influencers to create culturally relevant products and marketing.

7. Fraud prevention: 

- Implement robust online security measures.

- Use blockchain or other traceability technologies to authenticate products.

- Educate Chinese consumers on how to identify genuine Thai jewelry.

        By implementing these strategies, Thai gems and jewelry businesses can better navigate the challenges of CBEC while maximizing its benefits in accessing the Chinese market.

        To compare the tax, tariff, and duty rates for jewelry and gems from Thailand to China using normal channels versus Cross Border E-Commerce (CBEC), we need to look at several components. It's important to note that rates can change, so this information should be verified with current official sources. Let's break down the comparison:

Normal Channel:

1. Import Tariff: 

- For most jewelry items: 20-35%

- For precious stones (unset): 3-10%

2. Value-Added Tax (VAT): 

- Standard rate: 13%

3. Consumption Tax: 

- Applies to certain luxury items, including some jewelry: 5-10%

        Total tax burden using normal channels can range from about 36% to 58% depending on the specific product.

CBEC Channel:

1. Import Tariff: 

- Temporarily set at 0% for most CBEC transactions

2. Value-Added Tax (VAT): 

- Reduced rate: 70% of the standard VAT rate (effectively 9.1%)

3. Consumption Tax: 

- Reduced rate: 70% of the standard consumption tax rate

4. CBEC Comprehensive Tax: 

-Applied instead of separate import duties: 9.1% for most jewelry items

        The total tax burden using CBEC is generally around 9.1% to 18.2%, depending on whether the item is subject to consumption tax.

Key Differences:

1. Lower overall tax burden: CBEC offers a significantly reduced tax rate compared to normal import channels.

2. Simplified structure: Instead of separate tariffs and taxes, CBEC often applies a single comprehensive tax.

3. Thresholds: CBEC benefits typically apply to transactions under a certain value (often around 5,000 RMB per transaction and 26,000 RMB per person per year).

4. Product restrictions: Not all jewelry items may be eligible for CBEC import, and there may be limitations on gemstones.

5. Fluctuations: CBEC policies, including tax rates, can change more frequently than traditional import policies.

Considerations:

1. While CBEC offers lower tax rates, it may come with stricter regulations on product types, transaction values, and frequency of purchases.

2. Normal channel imports might be more suitable for high-value items or bulk shipments that exceed CBEC thresholds.

3. Some special types of gems or jewelry might not qualify for CBEC and would need to go through normal channels.

4. Companies dealing with both B2B and B2C might need to utilize both channels depending on their customers and product types.

To mitigate challenges:

1. Stay updated on CBEC policies, as they can change rapidly.

2. Carefully categorize products to ensure they meet CBEC eligibility.

3. Consider product pricing strategies that take advantage of CBEC tax benefits while staying within transaction limits.

4. For items not eligible for CBEC, explore free trade agreements between Thailand and China that might offer reduced tariffs through normal channels.

        Remember, while these figures provide a general comparison, exact rates can vary based on specific product classifications and current regulations. It's advisable to consult with customs brokers or trade experts for the most up-to-date and product-specific information.

Limited product categories:

        Not all jewelry items may be eligible for CBEC, restricting the range of products that can be sold.

The eligibility of jewelry and gem products for Cross Border E-Commerce (CBEC) in China is indeed an important consideration. Let's break down what types of products are typically allowed, and which ones may face restrictions:

Products generally allowed for CBEC:

1. Finished jewelry pieces: 

- Necklaces, bracelets, earrings, and rings made of precious metals (gold, silver, platinum)

- Fashion jewelry made of non-precious metals

- Jewelry with synthetic gemstones

2. Costume jewelry: 

- Lower-priced, trendy pieces often made with non-precious materials

3. Watches: 

- Both luxury and mid-range watches, as long as they fall within value thresholds

4. Some gemstone beads and small gemstones: 

Primarily for personal use or hobby jewelry making

Products that may face restrictions or not be eligible for CBEC:

1. High-value loose gemstones: 

- Large diamonds, rubies, sapphires, and emeralds above certain carat weights or values

2. Rare or exceptionally valuable gems: 

- Particularly those that might require special import licenses

3. Antique or historical jewelry: 

-Items over 100 years old often face import restrictions

4. Raw precious metals: 

-Gold bars, silver bars, or platinum in raw form

5. Industrial diamonds or other gems for industrial use

6. Jewelry or gems that exceed certain value thresholds: 

- Very high-value pieces that surpass CBEC transaction limits (often around 5,000 RMB per transaction)

7. Cultural relics or items of significant artistic value: 

- These may require special permits or be prohibited from CBEC channels

8. Jade and certain other culturally significant gemstones: 

- These may face additional scrutiny or restrictions

Factors affecting eligibility:

1. Value limits: Products must typically fall within specified value ranges to qualify for CBEC.

2. Quantity restrictions: There may be limits on how many items of a certain type can be purchased by an individual within a given period.

3. Material composition: Some materials may be subject to additional regulations or import restrictions.

4. Intended use: Products clearly intended for commercial resale rather than personal use may not be eligible for CBEC.

5. Certification requirements: Certain high-value gems or jewelry pieces may require certificates of authenticity or origin to be eligible for import, which can complicate CBEC transactions.

To mitigate these limitations:

1. Focus on product lines that clearly fall within CBEC-eligible categories.

2. Develop a diverse range of products at various price points to ensure some offerings remain within CBEC thresholds.

3. Provide detailed product information, including material composition and value, to facilitate easier customs clearance.

4. Consider partnering with Chinese domestic distributors for high-value or restricted items that don't qualify for CBEC.

5. Stay informed about changes in CBEC regulations and adjust product offerings accordingly.

6. For items that may face restrictions, explore the possibility of obtaining necessary certifications or permits to expand eligibility.

        Remember, CBEC regulations can change, and specific product eligibility may vary. It's advisable to regularly consult with Chinese customs authorities or experienced CBEC service providers to ensure compliance and optimize your product strategy for the Chinese market.

Written by: Sitthichai Parinyanusorn 

The Gem and Jewelry Institute of Thailand

August 2024