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- Textbook
- Chapter 1, §1.2.2 and §1.7; Chapter 2, §2.1, §2.2.3–2.2.4, §2.3.3; customs SRC-038; Canton Fair SRC-039/SRC-045
- Prerequisites
- Lessons 3–4: clusters, factories/traders/markets and B2B channels.
- Role in the course
- This lesson compares the main routes a Chinese product can take to reach overseas buyers, and the cost, speed and control each route implies.
- Distinguish traditional foreign trade, cross-border B2B and cross-border B2C/DTC by buyer, order size and control.
- Explain how Alibaba's platform layout maps each platform to a route and a market.
- Analyse how overseas warehouses or FBA change delivery speed, cash and inventory risk.
- Use customs data on export value and export share without confusing it with domestic online retail.
A Shenzhen factory makes a phone stand. It can sell 8,000 units to a German hardware chain at US$4.20 each, or retail the same stand on AliExpress at US$9.90 with free shipping. The first looks like a smaller margin per unit; the second looks like a bigger price. Which route actually leaves more money, and which one can the factory finance?
Focus
- Routes are chosen by buyer and control, not by which channel sounds more modern.
- Overseas warehousing trades cash and inventory risk for speed; it does not remove duty or demand risk.
- Customs export figures measure cross-border trade, not domestic online retail.
Likely difficulties
- Students treat DTC as "opening a store on a platform". DTC means owning the customer relationship and data; a marketplace store may still be platform-dependent.
- Overseas warehouses are assumed to avoid customs duty. Goods still enter the destination country and remain subject to import rules.
- The customs export series is compared with domestic online retail, producing meaningless growth claims.
Core concepts
What it is · Why it matters · How it explains the case · Difference from nearby concepts
Three routes EN
- What it is
- Traditional foreign trade (factory–trading company–foreign importer–wholesaler–retailer), cross-border B2B (overseas firms buy in bulk via platforms such as Alibaba.com), and cross-border B2C/DTC (Chinese sellers reach overseas consumers via AliExpress, SheIn, TikTok Shop or their own sites).
- Why it matters
- Each route assigns control differently: who owns the customer, who sets price, who bears inventory and who handles after-sales.
- How it explains the case
- Classify a case by buyer and control before comparing margins; the same factory can use several routes at once.
- Difference from nearby concepts
- B2B and B2C are not stages of progress. They are different buyers; a firm may run both.
- How it works
- Traditional trade relays through intermediaries; B2B platforms shorten the relay; B2C/DTC removes intermediaries but takes on traffic, fulfilment and returns.
- Conditions and limits
- Route choice depends on product, order size, capital, compliance capacity and target market; no route is universally superior.
Overseas warehouse and FBA EN
- What it is
- Goods are shipped in bulk to a warehouse in the destination country in advance and dispatched locally when orders arrive; FBA is Amazon's managed fulfilment service.
- Why it matters
- Local dispatch cuts delivery time and can improve conversion, but requires forecasting demand and paying storage before revenue arrives.
- How it explains the case
- Use it for predictable bestsellers with stable demand; avoid it for untested long-tail items.
- Difference from nearby concepts
- An overseas warehouse changes delivery, not the cross-border nature of the sale; it does not exempt goods from import rules.
- How it works
- Bulk export → destination warehouse → local pick, pack and delivery → returns handled locally where available.
- Conditions and limits
- Slow-moving stock becomes storage cost and tied-up cash; reverse logistics and tax treatment still need local compliance.
DTC (direct-to-consumer) EN
- What it is
- A brand sells directly to consumers through its own site, app or channel, owning the customer relationship and much of the data.
- Why it matters
- Direct ownership allows repeat purchase, customer insight and pricing control; it also means paying for traffic, fulfilment and service.
- How it explains the case
- Use it when the product supports repeat purchase or brand differentiation and the firm can fund acquisition.
- Difference from nearby concepts
- A marketplace store is not automatically DTC, even if the brand name is on the page; the platform still owns much of the relationship.
- How it works
- The brand acquires traffic, converts on its own property, fulfils orders and manages retention.
- Conditions and limits
- Traffic cost can exceed the margin; §1.7 flags rising acquisition cost as a major challenge.
Route mix and evidence EN
- What it is
- Firms often combine routes: B2B for volume, B2C for testing and DTC for brand building; offline fairs remain a trust and sampling channel.
- Why it matters
- A mix spreads risk: B2B provides volume and credit, B2C provides feedback, DTC builds assets. Each route's data has a different scope.
- How it explains the case
- When citing figures, state whether they are customs cross-border trade, platform GMV or domestic online retail.
- Difference from nearby concepts
- An offline fair is not the opposite of ecommerce; many B2B deals are met online and closed offline.
- How it works
- Customs data measure trade value; platform data measure transactions on that platform; domestic statistics measure purchases inside the country.
- Conditions and limits
- No single dataset covers the whole route mix; triangulate and label each source.
Start with the factory's two options. Selling 8,000 units to a German chain at US$4.20 is traditional or B2B trade: one buyer, one negotiation, one shipment, and payment after delivery. Retailing at US$9.90 on AliExpress is B2C: thousands of small orders, platform commission, advertising, shipping and returns. The price is higher in the second route, but so are the costs and the work.
The textbook's §2.1 and Alibaba's platform layout provide a map. Traditional foreign trade is a relay: factory to trading company to foreign importer to wholesaler to retailer. Cross-border B2B shortens the relay: an overseas firm buys in bulk directly from a Chinese supplier through a platform such as Alibaba.com. Cross-border B2C or DTC removes most intermediaries: a Chinese seller reaches overseas consumers through AliExpress, SheIn, TikTok Shop or its own site. These routes coexist; they are not stages that replace one another.
Alibaba's layout illustrates the mapping. Alibaba.com is export B2B; AliExpress is export B2C; Tmall Global and Kaola are import B2C; Lazada serves Southeast Asia, Trendyol serves Turkey, and Daraz covers Pakistan, Bangladesh, Sri Lanka, Nepal and Myanmar. The same group runs different routes because target buyers and markets differ. A supplier reading these names can tell who the buyer is and which direction the goods flow.
The customs series gives the scale, with a scope warning. China's cross-border ecommerce exports rose from about CNY 611.6 billion in 2018 to about CNY 2,267.2 billion in 2025, and the export share of total cross-border ecommerce rose from about 58% to about 80% (SRC-038). These are customs-counted cross-border transactions. They are not domestic online retail, and they do not measure platform GMV. Comparing them with a domestic retail figure would produce a meaningless growth claim.
Route choice is a control trade-off. In B2B, the buyer is concentrated, orders are large and payment terms matter; the seller negotiates with a professional buyer but does not pay for consumer traffic. In B2C, the seller reaches many consumers but must pay for acquisition, fulfilment and returns. §1.7 flags rising traffic cost as one of the hardest challenges, which is exactly why some firms stay in B2B while others build DTC.
DTC is often misunderstood. It is not simply "a store on a platform". DTC means the brand owns the customer relationship and much of the data, so it can manage repeat purchase and pricing directly. A marketplace store may carry the brand name, but the platform still controls discovery, rules and much of the customer data. DTC therefore requires capabilities that a factory may not have: content, acquisition, service and retention.
Overseas warehouses and FBA change the delivery equation. Goods are shipped in bulk before orders arrive, stored locally and dispatched quickly. This shortens last-mile time and can lift conversion, but it requires a forecast. If demand is lower than expected, storage fees and tied-up cash accumulate. If demand is higher, stock-outs lose sales. The warehouse does not remove duty or import compliance: goods still enter the destination country.
Offline channels remain part of the mix. The Canton Fair, held twice a year since 1957, continues to bring buyers and suppliers together; the 138th session ran from 15 October to 4 November 2025 with 1.55 million square metres of exhibition space and 74,600 booths (SRC-045). Many B2B relationships are "met online, closed offline": the platform starts the conversation, the fair or a factory visit closes it.
A practical decision therefore uses four questions. Who is the buyer: a firm or a consumer? How large is the order and how concentrated is demand? Who bears inventory, traffic and returns? What evidence do you have for demand? The answers point to a route or a mix. The factory in the opening can run both: B2B for volume and cash, B2C for testing and learning, DTC only if it can fund acquisition.
Example 1: one group, several routes
Alibaba.com serves overseas business buyers (export B2B); AliExpress serves global consumers (export B2C); Tmall Global and Kaola bring foreign goods into China (import B2C); Lazada, Trendyol and Daraz serve regional consumers. The platform name tells you the route and the market.
Concept applied: Three routes and platform scope.
Example 2: warehouse economics
A bestseller with steady weekly demand can justify bulk shipping and local storage; a new colour with unknown demand cannot. The warehouse lowers delivery time but raises the cost of being wrong.
Concept applied: Overseas warehouse trade-off.
Case
Teaching scenario (fictional, for analysis)
Case: two routes for one phone stand (teaching case)
- Background and period
- Fictional exercise for comparing routes; it does not represent a real transaction. A Shenzhen factory makes a phone stand at a unit cost of US$2.10 including packaging. It considers two routes for the same product.
- The problem
- Route A sells 8,000 units to a German hardware chain at US$4.20 ex-works, FOB Shenzhen, with 45-day payment terms. Route B retails at US$9.90 on AliExpress with free shipping; platform commission is 8%, marketing is US$2.50 per unit, logistics is US$3.10 per unit, and the return rate is 4%.
- What was done, with evidence
- Route A: revenue 8,000 × 4.20 = US$33,600; variable cost 8,000 × (2.10 + 0.15 inland + 0.05 documents) = US$18,400; contribution US$15,200 (45.2%). Route B: contribution per order = 9.90 − 2.10 − 3.10 − 0.79 commission − 2.50 marketing = US$1.41; after an illustrative 4% return cost, about US$1.20. Cash: A collects 45 days after shipment; B receives platform payouts in about 7–14 days but pays marketing upfront.
- Observable results
- No real cost or sales data are used. A leaves far more total contribution and requires one buyer and one shipment; B leaves a thin per-order margin but provides consumer feedback and does not depend on a single buyer. A needs working capital for 45 days; B needs cash for advertising before sales arrive and can absorb returns.
- Concepts applied
- Three routes; DTC versus marketplace; overseas warehouse trade-off; customs scope.
Discussion questions
- Recompute the contribution for both routes and state your assumptions.
- Which route would you choose if the factory has limited working capital? Why?
- What would change if Route B used an overseas warehouse (higher logistics cost, faster delivery)?
- Which route provides better evidence for developing a DTC brand, and what is missing?
Teacher analysis notes
Make students write assumptions before computing. The numbers are illustrative, so the reasoning matters more than the exact result. Ask why Route A has a higher unit contribution but a concentration risk. Connect Route B's marketing cost to §1.7.
Source: Teaching case written for this course; route definitions from SRC-002 §2.1–2.2; customs context from SRC-038. No real costs or orders.
Chart / diagram
China's cross-border ecommerce exports (2018-2025, selected years)
2018
6116 (58%)
2020
10850 (67%)
2022
15321 (74%)
2024
21520 (79%)
2025
22672 (80%)
2018—2025 · 亿元人民币(括号内为出口占进出口合计比例) · 海关总署(SRC-038);口径:海关统计跨境电商,不含国内网上零售
Exports keep growing; the export share rises to about 80%. Percentages in brackets are export shares of the total.
How to read this chart
- Read the bars as customs-counted export value in CNY 100 million; the series is not domestic online retail.
- Read the brackets as the export share of total cross-border ecommerce, rising from 58% to 80%.
- The chart shows growth and composition, not profitability, platform GMV or which route caused the growth.
Traditional foreign trade
Traditional foreign trade (factory–trading company–foreign importer–wholesaler–retailer), cross-border B2B (overseas firms buy in bulk via platforms such as Alibaba.com), and cross-border B2C/DTC (Chinese sellers reach overseas consumers via AliExpress, SheIn, TikTok Shop or their own sites).
Cross-border B2B
Traditional foreign trade (factory–trading company–foreign importer–wholesaler–retailer), cross-border B2B (overseas firms buy in bulk via platforms such as Alibaba.com), and cross-border B2C/DTC (Chinese sellers reach overseas consumers via AliExpress, SheIn, TikTok Shop or their own sites).
DTC
A brand sells directly to consumers, bypassing traditional retail intermediaries.
Overseas warehouse
A warehouse in the destination country used for stock and local fulfilment.
FBA
Goods are shipped in bulk to a warehouse in the destination country in advance and dispatched locally when orders arrive; FBA is Amazon's managed fulfilment service.
Ex-works
The seller hands the goods over at the factory; the buyer bears onward transport and risk.
FOB
The seller covers costs up to loading on board; risk passes after loading.
Contribution
Contribution per unit = quote − all variable costs, including freight, duty where the seller bears it, and the after-sales reserve.
Working capital
The cash needed to sustain purchasing, production and payment terms.
Canton Fair
The Canton Fair, held twice a year since 1957, continues to bring buyers and suppliers together; the 138th session ran from 15 October to 4 November 2025 with 1.55 million square metres of exhibition space and 74,600 booths (SRC-045).
Common claimDTC means opening a store on a platform.
What needs clarifyingDTC means owning the customer relationship and data; a marketplace store remains platform-dependent.
Common claimOverseas warehouses exempt goods from customs duty.
What needs clarifyingGoods still enter the destination country and remain subject to import rules.
Common claimCustoms export figures are domestic online retail.
What needs clarifyingThey measure cross-border trade value, a different scope.
Common claimA firm must choose either B2B or B2C.
What needs clarifyingThe same factory can run both; the routes serve different buyers and purposes.
Common claimOffline fairs are obsolete in the platform era.
What needs clarifyingFairs remain a trust and sampling channel; many B2B deals close offline.
Common claimHigher retail price means higher profit.
What needs clarifyingB2C adds commission, marketing, logistics and returns; contribution can be thinner than B2B.
- Which route would a factory with one strong product and no marketing team choose first?
- Why can a higher retail price produce a thinner contribution than a wholesale price?
- What evidence would convince you that demand is stable enough for an overseas warehouse?
- In your home country, which route is most common for imported Chinese goods, and why?
Route choice in 12 minutes
Choose a route or mix for one product and defend it with four questions.
- 3 min In groups, pick one product and state its unit cost and target market.
- 4 min Answer four questions: buyer, order size, who bears traffic/inventory/returns, demand evidence.
- 3 min Choose a route or mix and list the capabilities it requires.
- 2 min Name one condition under which you would switch routes.
What students produce: One route decision with four answers and one switching condition.
Teacher reference notes
Push groups beyond "B2C is more profitable". Ask who pays for traffic and who absorbs returns. Require a switching condition, because route choices are contingent, not permanent.
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跨境电商概论Lesson5_三条路径
· PDF · v1 · 661 KB
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跨境电商概论Lesson5_三条路径
· PPTX · v1 · 114 KB
Self-check
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Some questions are unanswered
Only you can see your notes; teachers and other students cannot.
- Three routes differ in buyer, order size, control and who bears traffic, inventory and returns.
- Alibaba's platforms map routes and markets; the same group can run export B2B, export B2C and import B2C.
- Overseas warehouses trade cash and inventory risk for speed; they do not remove duty.
- DTC means owning the customer relationship, not merely opening a platform store; customs figures are cross-border trade, not domestic retail.
Materials & Extensions
Before class, in class, case discussion and after class. Only published materials are shown.
In class
link · Optional
AliExpress — consumer export marketplace
Example of an export B2C route; compare its buyer, pricing and fulfilment with Alibaba.com.
en · AliExpress (SRC-083)
· Link only; terms on site
Open
Case discussion
case · Required
Exercise: choose a route
Use four questions (buyer, order size, who bears traffic/inventory/returns, demand evidence) to choose a route and name a switching condition.
en · Course teaching case (fictional)
· Original teaching material
After class
link · Optional
Canton Fair — introduction
Official introduction: founded in 1957, held twice a year. Use it to discuss how offline fairs support samples, trust and large orders.
en · China Foreign Trade Centre (SRC-039)
· Link only; official site
Open
- Textbook §1.2.2 and §1.7; Chapter 2 §2.1, §2.2.3–2.2.4 and §2.3.3.
- Customs series SRC-038; Canton Fair introduction SRC-039 and 138th session note SRC-045.
- AliExpress (SRC-083) and SHEIN (SRC-087) official sites for route positioning.
跨境电商概论chapter 2.docx
· Chinese original source
Provided by the teacher · SRC-002
海关总署统计分析司 · 2026 · SRC-038
China Foreign Trade Centre (Canton Fair) · SRC-039
商务部 / 中国对外贸易中心 · 2025 · SRC-045