Welcome to the final installment in our Local Insights series. Over the past few weeks, we’ve been putting together country-specific pointers to help you advance your overseas expansion plans. With Germany, the US, Australia & New Zealand, Brazil and the UK already covered, it’s time to move on to China.
E-Commerce in China
China is a force to be reckoned with. It’s now the world’s largest e-commerce market, with online sales surpassing those in the US as of 2013. And there are no signs of a slowdown. By 2020, the Chinese market is predicted to be bigger than those of the US, UK, Japan, France and Germany combined.
There’s no doubt about it: The Chinese love to shop online, and 75% of Chinese online shoppers do so at least once a week. The growth of the internet has opened up shopping opportunities for those in remote regions, with 60% of China’s rural internet users shopping online. This provides retailers with a potential wealth of new customers. And with disposable incomes on the rise, there’s even more reason to become a player in the Chinese e-commerce market.
The Consumer’s Mindset
There are, however, some things to consider before you set out on your journey east. A good return on your investment isn’t a given, and there are regional retail requirements to take into account, as well as different approaches to online shopping. Chinese customers value quality, authentic goods. This is good news for sellers from overseas since Western brands are usually synonymous with quality. Most Chinese buyers, however, value a good price, so you may need to think about discounting heavily if you want to compete. If you can’t compete on price, then focus on quality and safety.
E-commerce in China is almost totally marketplace-dominated, with over 90% of all online orders taking place on these platforms. The Alibaba Group controls more than 80% of e-commerce transactions, with the total value of sales in 2013 amounting to $248 billion USD, more than eBay and Amazon.com combined. Given this, it’s inevitable that you’ll hear about Alibaba if you’re planning on expanding to China. To gain access to the Chinese e-commerce market, consider launching your presence on one of Alibaba’s two business-to-consumer (B2C) marketplaces: Tmall or Tmall Global.
Tmall and Tmall Global
Tmall has more than 70,000 brands, 50,000 merchants and serves more than 180 million buyers. Once you’ve paid a deposit, you can set up your own website and then pay a commission per transaction. But in order to list, you need to have a physical presence and business license in China, as well as be registered as a legal entity for local tax. In addition, you must set up a corporate bank account, have a local warehouse for shipment and delivery and be trademark-registered in China.
Or you can opt to sell through Tmall Global, which was set up to make international selling more attractive to foreign sellers. It allows merchants to list products on the platform without having a physical presence in China. This might be the only way you can make selling into China financially viable.
When listing on either of the two Tmall sites, you have to keep commission rates in mind. Tmall Global uses Alipay Global, which you have to pay extra to use. And you also need to provide listings with more photos and product information than when listing on US marketplaces, since Chinese online shoppers are very image-focused. Content also needs to be localized to Simplified Chinese. (To avoid problems later on, we strongly recommend using a professional translator.)
Fulfillment is another issue, and you’ll need a third party to deliver your items. With Tmall Global, you can choose either freight-forwarding — where you ship to a domestic hub and get your logistics company to ship to China — or bonded warehouse, where you ship products in bulk by sea freight and fulfill from Chinese warehouses. Whichever option you choose, you must have a China-based returns policy with a Chinese return address. Tracking is required, and because Chinese consumers value quick delivery, aim for within 72 hours.
If you can take on the extra logistics and financial implications of selling into China, there’s every chance you can become a big success there. The best advice is to start small and list just a selection of your inventory, then watch carefully to gauge results before putting more items out there.
We hope you’ve enjoyed our Local Insights blog series. If you’re interested in learning more about selling to China, our Tmall and the Chinese Market eBook makes essential reading!