E-commerce is the new opportunity for brands in China

With the lockdown due to the health crisis, the temporary closure of offline stores resulted in a boost to e-commerce as people shifting toward more online shopping.

Despite the drama of Covid19, in fact, new opportunities have opened up for brands that has seen e-commerce, a sector that was already worth 36% of total sales in China, growing by 5.9% in the first quarter of 2020.

The three major Chinese e-commerce platforms have seen strong growth:

  1. Tmall sales of physical goods had a year-on-year growth rate of 10% in Q1 2020.
  2. JingDong grew by 24% in terms of the total value of all orders at the end of 2019
  3. Pinduoduo saw an increase in sales of 108% from RMB 557 billion in Q1 2019 to RMB 1.15 trillion in Q1 of 2020.

Foreign brands looking to enter the Chinese market or establish new online sales channels should pay attention to the new trends emerging in China following Covid-19.

China eCommerce Growth by Category

Snack, mother & baby, and women’s fashion are the top-selling products in 2020. By the way, men’s fashion, cosmetics, and beauty products also are growing.

  1. Snack and nuts 54%
  2. Mother & baby 36.5%
  3. Women’s fashion 31%
  4. Men’s fashion 29%
  5. Cosmetics and perfumes 27%
  6. Beauty and personal care 25%
  7. Appliances 6,2%

2020 trends in the e-commerce sector in China

Live streaming as a sales medium

Il live streaming è diffusissimo e molto amato in Cina ed ha visto una crescita esponenziale, grazie anche al supporto di piattaforme come Taobao Live, Xiaohognshu, JD Live, Yizhibo, dai mini-program di WeChat ed altri.

Livestreaming sessions host real-time broadcasting of video content by presenters such as social media KOLs (Key Opinion Leaders) that model or try out products. Viewers are able to purchase featured items while watching a video through embedded online links.

You can find and buy all kinds of products like apparel, electronics, cosmetics, cars, hotel packages, food and so on.

This is also called live-commerce, a fusion between live streaming and e-commerce.

Live-commerce is efficient because it provides:

  • Awards
  • Discounts
  • A wide range of products
  • Low prices
  • Entertainment
  • Limited-time offers
  • KOL who offers recommendations

 

KOLs & KOCs as a marketing strategy

Brands will have to rely more and more on a strategy that integrates Key Opinion Leader with Key Opinion Consumer since while KOLs have millions of followers and influence the preferences of the masses, KOCs attract more selected consumer niches.

Key opinion consumers (KOCs) are “normal” buyers who create videos and posts about their own product reviews and recommendations. Therefore, they are more trusted by Chinese consumers because:

  • The recommendation comes from real consumers
  • Compared to KOLs they are more authentic

For example, KOC marketing is actually one of the key components of Perfect Diary’s marketing plan that has helped it to become one of the top cosmetics brands in China.

An integrated influencer marketing strategy is the optimal way to reach all consumer groups.

Short-video platforms

Apps for creating short videos like Douyin or Kuaishou are widely used and loved in China. One of the reasons for this success is precisely the integration of these platforms with online shopping sites.

The border between business and socialization continues to blur. It will not surprise you that more and more Chinese are using short video apps.

Users are encouraged to spend time on these platforms by customizing personalized content based on browsing history and preferences, thanks to the integrated AI technology.

 

Smart logistic is a key element of Chinese eCommerce

Thanks to an ever-improving distribution network, e-commerce has had a great boost in the country. Just think that in some first-class urban areas Alibaba guarantees deliveries in 30 minutes within a radius of 3km.

In recent months, digital and logistics transformation have strongly favored the online retail sector.

 

Group & social buying

Group buying refers to the offer of products and services at reduced prices if purchased in large quantities.

The group-buying model expands the e-commerce market to third and fourth-tier cities as they can join together to take advantage of the lower prices.

Major e-commerce players have launched group-buying platforms to tap into this segment of shoppers:

  • Pinduoduo (2015)
  • com (It started its group-buying mini program on WeChat in 2018 and launched its group-buying app Jingxi in 2019)
  • Alibaba (Juhuasuan in 2010, Pingou in 2018)
  • Suning (2018)

Mini programs: a New trend of Chinese eCommerce

Mini-programs work as secondary apps within large platforms such as WeChat and are used to expand the functions of the applications. Users can perform similar functions without having to download a separate app.

Mini-programs are characterized by the fact of:

  • Being able to be used to replicate the activities of large e-commerce platforms on a small scale
  • Brands can use them as a second sales channel
  • They are useful for content marketing to better engage customers and encourage them to share content with friends

Thanks to the support of augmented reality (AR), companies can overlay virtual images on the physical world. For example, Armani’s cosmetics mini-program allowed users to test the look of different makeup items through users’ self-facing camera on their cell phones.

 

Social eCommerce

Social commerce is the merging of social networking and online shopping functionality. The use of social media is becoming increasingly indispensable to reach users and push them to buy.

Thanks to these platforms:

  • Brands can increase Awareness through social media
  • Brands can focus on sales conversion through an e-commerce platform
  • Increasing numbers of consumers are making their purchases
  • Ecommerce platforms have content on the product page, accelerating purchasing
  • IP cooperates with e-commerce, turning culture into cash.

The two main platforms that are known for their use of social e-commerce include Xiaohongshu and Pinduoduo.

According to a report released by China Internet Watch, the total volume of sales from social e-commerce is predicted to increase to 2.06 trillion RMB by the end of 2020.

It is therefore necessary for brands to fully exploit the potential of this growing sector in the near future.

 

China Cross-Border E-Commerce

Foreign businesses that do not wish to establish a physical presence in China can also choose to supply their products through cross-border e-commerce channels.

Through cross-border companies can sell their products directly to Chinese consumers by sending them from their country of origin. They do this by switching from platforms like Tmall Global, JD Worldwide, Kaola e Vip international.

The e-commerce cross-border is booming in China and with the acquisition, in September 2019, of one of the main players, Kaola, the Alibaba group is aiming for even more significant development.

According to Deloitte data, the cross-border channel in China originated RMB 78.5 billion in gross volume of goods in 201 and the cross-border market is expected to reach € 150 billion in 2020 (20% of the total sales expected this year for e-commerce in China).

 

How to start your business through cross-border e-commerce platforms in China?

  1. Register a trademark in China and start conducting due diligence on e-commerce agents who can assist you in the field.
  2. The only technical qualification for a cross-border e-commerce agent in China is that their business scope allows them to engage in these services.
  3. The foreign company must prepare an agreement with the Chinese agent who authorizes them to act as an agent on their behalf.
  4. The agent will complete the registration on your behalf in a cross-border e-commerce pilot zone together with the customs, tax and the accounting and bookkeeping registration.

 

On May 6, 2020, China’s State Council issued the Approval of the Establishment of Integrated Pilot Zones for Cross-border E-commerce in 46 Cities and Areas, bringing the total to 105 such zones in China.

These pilot zones provide various benefits for foreign and local companies engaging in cross-border e-commerce including:

  • standardized procedures,
  • exemption of value-added tax (VAT) and consumption tax on retail exports
  • reduction of corporate income tax (CIT) rates in CBEC pilot zones.

 

How can brands enter Chinese e-commerce platforms?

Setting up a store on one of the major e-commerce platforms generally consists of the following four steps:

 

  1. Application Submission

When completing the application, which implies a duration of 1 day, you have to:

  • choose the type of store
  • select the category of products
  • prepare documents required
  • submit the application online

 

  1. Verification

The application verification implies a duration of 7 days and includes:

  • qualification of the applications by the e-commerce platform according to the documents submitted.

 

  1. Preparation for store opening

Preparing for the store opening implies a duration of 7-14 days and involves:

  • activating the account by making the appropriate payments
  • prepare the product pages and ensure that the store navigation and design is intuitive
  • synchronize logistics and distribution to be consistent with the e-commerce platform
  • prepare the customer service staff for the official launch

 

  1. Official launch

The official launch implies a duration of 3 days and includes:

  • the launch of product sales and of any marketing plans to increase traffic to the store
  • increasing initial traffic and sales to store long-term success.

 

What are the certificates to present to set up a store?

  • Contact information
  • Registration documents or business license of the company setting up the store
  • Statement from an authorized representative of the company
  • Identification documents
  • Bank account opening or bank statement
  • Trademark registration
  • Authorization from the brand owner

For cross border e-commerce:

  • Company registration outside china
  • Qualifications for selling overseas

For domestic e-commerce:

  • Company registration in China
  • Company tax registration
  • Organizational code

 

gma agency

Do you want to know more about How to use Chinese e-commerce platforms to boost sales? Contact GMA a digital marketing agency, specialized in the Chinese digital market.

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