The cross-border e-commerce industry continues to experience dramatic shifts, with the recent troubles of former industry leader Cross Border Pro drawing significant attention. A new announcement has thrust the company back into the spotlight: Xu Jiadong, the former chairman and general manager, is under investigation for alleged embezzlement. Is this the full story, or are there deeper complexities at play?
I. The Announcement That Shook the Industry
On December 3, Cross Border Pro disclosed in a public filing that Xu Jiadong was under investigation by the Wanbailin Branch of Taiyuan Public Security Bureau for suspected embezzlement. The company emphasized that its operations remained normal while acknowledging the uncertain impact of the case. The filing noted that after Xu's departure in May 2021, the company discovered potential wrongdoing during his tenure, though specific amounts and involved parties await official confirmation.
This development sent shockwaves through China's e-commerce sector. Once hailed as the "first cross-border e-commerce stock" with a peak market value of ¥35.6 billion, Cross Border Pro has struggled since 2020 when its subsidiary Global Egrow began facing operational challenges including inventory pileups and legal disputes.
II. The Executive's Defense: Claims of False Accusations
Sources indicate that shortly after the announcement, Xu allegedly responded via social media, calling the accusations "false allegations" and characterizing them as an inappropriate escalation of what should be a commercial dispute. Xu reportedly vowed to pursue all legal avenues to clear his name.
While these claims remain unverified, they raise questions about potential underlying conflicts or competing interests behind the investigation.
III. Legal Perspective: Understanding Embezzlement Charges
Legal experts note that embezzlement constitutes a criminal offense with relatively low prosecution thresholds in China. Under judicial interpretations, misappropriation exceeding ¥30,000 warrants investigation. If substantiated, Xu could face serious legal consequences.
IV. Xu Jiadong: A Pioneer in Cross-Border E-Commerce
An industry veteran, Xu founded Global Egrow in 2008 before its acquisition by Cross Border Pro in 2014. Serving as chairman and CEO from late 2018 through May 2021, Xu witnessed and contributed to the sector's explosive growth.
V. The Decline of Cross Border Pro: From Dominance to Distress
The company's downfall resulted from multiple factors:
- Flaws in the Bulk Listing Model: Following its 2014 acquisition of Global Egrow, Cross Border Pro saw revenues skyrocket from ¥842 million to ¥3.96 billion the next year. Subsequent purchases of companies like Patuoxun and Youyi E-commerce propelled 2018 revenues to ¥21.53 billion. However, the bulk listing approach created massive inventory burdens that eventually crippled operations.
- Financial Collapse: The company reported staggering losses of ¥2.69 billion in 2020, primarily due to declining European/American sales and inventory write-downs.
- Asset Divestitures: In 2021, facing liquidity pressures, Cross Border Pro sold Patuoxun for ¥2.02 billion and later liquidated Shenzhen Global.
- Bankruptcy Proceedings: This September, Global Egrow entered compulsory liquidation, marking the end of a once-dominant subsidiary.
VI. Transformation Efforts: Pivoting to Brand Strategy
Seeking revival, Cross Border Pro has shifted toward brand development and operational refinement:
- Inventory Optimization: Implementing tighter controls to reduce dead stock and improve capital efficiency.
- Private Label Focus: Investing in owned brands like ZAFUL and Rosegal. ZAFUL ranked #43 on the 2021 BrandZ™ China Global Brand list and became the world's second-largest online fast-fashion retailer after SHEIN.
VII. Outlook: Can Cross Border Pro Regain Its Stature?
While showing some progress, the company faces substantial challenges. The investigation into Xu adds further uncertainty. Whether Cross Border Pro can successfully transition from its troubled past remains unclear, but the broader industry has clearly entered an era requiring sophisticated operations and brand differentiation.
VIII. Industry Implications: The Need for Evolution
Cross Border Pro's trajectory offers cautionary lessons for cross-border e-commerce:
- Operational Refinement: Moving beyond bulk listings to focus on product quality, user experience, and brand building.
- Brand Development: Creating distinctive proprietary brands to command premium pricing.
- Channel Diversification: Reducing reliance on single platforms through multi-channel strategies.
- Risk Management: Implementing safeguards against inventory, currency, and other operational risks.
As the industry undergoes profound transformation, only continuous innovation and adaptation will ensure sustainable success in this increasingly competitive landscape.