How can E-Commerce Businesses enter the Chinese Market?
China is a constantly evolving market with 18 million cross-border shoppers. In 2013 China surpassed the US “the world’s largest digital retail market”, a report from Bain & Co states. 84% of Chinese online shopping is spent on US e-commerce sites. Many Chinese consumers prefer to shop abroad for luxury products to avoid high local taxes.
However, China is one of the most difficult markets to enter and the competition is fierce. Global luxury brands and local Chinese brands have aggressively increased their e-commerce marketing efforts making it difficult for smaller brands to compete. So although it is not impossible to enter China’s rapidly growing e-commerce markets, it is highly competitive.
Let’s face it; bigger and local companies have an edge. They are able to translate their e-commerce site accordingly and specifically tailor to the Chinese demographic. Additionally, social media platforms are completely different and shipping is still not 100% reliable.
Challenges aside, the Chinese locals are increasingly purchasing from smaller niche brands in an aim for uniqueness. In some circles, buying from obvious luxurious brands such as Louis Vuitton and Gucci is seen as tacky. The trend publication Jing Daily mentioned recently “Today’s affluent Chinese consumers see luxury as a way of life, not just the occasional purchase of a good or service, separate from the rest of their lives.” Take a look at the full article here.
So how can your small businesses test the waters and organically get a feel for opportunities in China?
Below are my recommendations:
Shipping methods in China are not completely reliable yet. When shipping to any Chinese location, you must include insurance fees in case the package gets lost. It’s also worth ensuring that you always use a reliable tracking service for added goods protection. Whilst shipping infrastructure is improving in China, it still has a long way to go, particularly outside its major cities of Hong Kong, Shanghai and Beijing. Another option to consider are package forwarding services such as Ship2Me.com and US Global Mail. The following service creates a US based shipping address for the international consumer. Items purchased are shipped to a warehouse and consolidated into a bulk package that can be sent to their home country. Lastly, if you are as a business planning to more aggressively ship to Asia, I suggest you consider working with a fulfillment company. Shipwire.com and Shipstation.com help you streamline your shipping. They automate shipping and help you to manage higher volumes by setting up your products in various warehouses around the world.
2. Sell on Taobao or Tmall
If you want to sell anything online in China, then Taobao and Tmall are your go-to e-commerce destinations. Similar to EBay, Taobao and Tmall are two of the world’s leading marketplaces for Chinese consumers to do their online shopping. China’s shoppers and entrepreneurs alike are turning to these influential platforms as they are easy to access and are ideal selling point for start-up brands to showcase their products. Both of these platforms house over 70,000 e-commerce brands. They allow brand merchants to sell their goods across Greater China without having to create a China specific e-commerce site. Selling on these platforms will allow your brand to test a potential product in China without spending extra funds needed to translate your site. Taobao and Tmall will act as portals for your brand, potentially bringing additional traffic to your e-commerce site.
3. Register and Create an Account with Alipay
Alipay is a PayPal-like payment service allowing users to make purchases without sharing their credit card information. Opening up an account is simple. Once you created your Alipay account, ensure to add the payment options within your e-commerce checkout form.
4. Find a local partner
Finding a local partner is a MUST. You must find a consultant or local business who can help you manage Chinese social media platforms and your Taobao / Tmall accounts. Find someone who speaks Mandarin fluently and has experience with the Chinese online retail environment. Many Chinese residents have a virtual private network, which enables them to break through the governmental Google, Twitter and Facebook blocks by encrypting their overall online browsing. However, please note that China uses completely different social media platforms to the ones used in other countries. These platforms include: Ozone, Weibo, Renren and Kaixin.
5. Consider Other Markets
China is one of the toughest markets to penetrate but it is definitely worth the investment. My recommendation for smaller companies who may be just starting out is to begin with other markets like Singapore, Malaysia, Indonesia and the Philippines. The demographics in these countries are active on universal social media platforms such as Facebook, Twitter, Pinterest, Youtube, etc.. Needless to say, this will provide you with an advantage for reaching out and appealing to new consumer markets, which is the aim of the game here.