Hong Kong’s e-commerce operators are exploring new markets and delaying major business decisions in light of US tariffs, industry players have said.
One industry body said e-commerce firms could look towards expanding their operations in traditional markets when diversifying their business, while also exploring emerging ones in Southeast Asia, as well as Central and South America.
US President Donald Trump last week announced that the tariff imposed on small parcels sent to the United States from mainland China and Hong Kong would be further raised to 120 per cent from 90 per cent.
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Trump also said the “de minimis” trade exemption for goods worth US$800 or below from the mainland and Hong Kong would cease on May 2.
The provision allows companies to avoid US import duties by shipping products directly to individual consumers in small parcels, usually via air cargo.
Leon Lai, director of Taiwan-based e-commerce services firm 91APP, said 10 per cent of his company’s clients had been affected by the tariffs.
Lai said his firm had advised these companies, all from Hong Kong, to either consider further developing local sales or think about expanding to Southeast Asia.
“In the past few years, e-commerce in Southeast Asia has developed really quickly. With the adaptability and operating ability of Hongkongers, there are a lot of markets that we can expand into. In Southeast Asia, this could include Malaysia or Singapore,” he said.
“These countries use English and they can understand traditional Chinese. This is combined with the cheap cost of shipping for these countries right now, so it would be very easy to reach these markets.”
Lai said he had also observed these clients delaying certain investments, such as opening up new teams or research and development.
“It may not even be their American markets. If there are decisions that require investments in any of their markets, they will be more cautious or consider pushing forward at a later time,” he said.
Hong Kong-based bag retailer Moral Team is among firms considering the way forward following Trump’s tariffs.
Marketing manager Charlotte Chui Hiu-yan previously told the Post that about 10 per cent of the firm’s e-commerce business was from the United States and that the tariffs would “definitely” affect the company.
Hui said on Thursday that the company would slow down developing its US market to focus more on Taiwan, Singapore and Japan, while also exploring Europe.
The firm’s short-term strategy would be to focus on Taiwan and Singapore first, while entering the European and Australian markets would be long-term goals, she added.
“Singapore and Taiwan will be more like the Hong Kong market compared with Europe,” she said. “Our strategy will be based on different markets, as the demand in every market is different.”
For instance, she said, the firm would consider introducing medium- to high-priced products to Singapore as spending power there was similar to that of Hong Kong.
Hui said that in the short term, the pivot to Taiwan and Singapore would make up for some of the firm’s losses in the American market.
Stanley Lee Kei-chuen, president of the E-Commerce Association of Hong Kong, said those looking to diversify their business could consider other traditional markets, as well as emerging ones.
For traditional markets, Lee said operators could look at putting more emphasis on Europe and Australia.
“In the past, everyone would prefer to sell to the American market, why? The American market has stronger spending power, their tax system is relatively more simple,” he said.
“Europe has always been a more complex market compared with the United States, so most people would prefer the American market. However, under the current situation, you will need to consider that market even if it is difficult.”
The Australian market had seen rapid development of e-commerce so operators have been putting more effort there, he said.
In terms of emerging markets, Lee said Southeast Asia had rapid growth, but products sold in the region would generally be cheaper and operators would have to compete with those from mainland China.
“For Central and South America, customs and tax arrangements are relatively more complex, but it is for this reason that their individual retail prices of products are relatively higher,” he said. “So which market you pick depends on what you aim to achieve.”
Lee said operators could also consider setting up warehouses in the United States to reduce the effects of the cancellation of the de minimis exemption.
“As these overseas warehouses use traditional trade routes to have products enter the United States, even though this method would still require businesses to pay tariffs, it would reduce the risks brought about by the cancellation of the de minimis exemption.”
He noted that as e-commerce operators were not shipping products directly to customers in this case, some flexibility was possible in how companies could declare the value of the products.
“In the world of e-commerce, theoretically speaking, the sender and receiver would be the same company, so there would be some leeway in declaring the price of goods to customs,” he said.
“This is also combined with the fact that as the product is not sold yet, they would have some room on the declared value.”
More from South China Morning Post:
- How Trump’s tariffs are forcing mainland, Hong Kong firms to rethink plans
- Hong Kong caught in middle of Trump tariffs, AmCham says
- Hong Kong to boost efforts to lure investment, talent in light of US tariffs
- Hong Kong jewellers weigh reducing US exposure, relocating amid Trump’s tariffs
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