E-commerce now represents 15.5% of total retail sales in the whole of China.
China’s ecommerce market remains the largest and most lucrative in the world, with over 800 million Chinese now connected online and 350 million middle class consumers actively engaging in e-retail purchases, there is no denying the potential for international brands.
The National Bureau of statistics reported that the Chinese e-commerce market growth rate increased by 26.2% in 2016 and generated ¥5.16 trillion. The fastest growth rate in online shopping adoption is now occurring in the smaller, third tier cities as the marketplace widens and levels of wealth continue to grow as GDP increases by 7% year on year. The market in the larger cosmopolitan centres also remains strong as it matures.
One could argue that this is China’s ‘e-commerce age’ and global companies are all vying for a slice of the pie. However, despite the wealth of opportunity, E-commerce / product sales is a notoriously difficult business to launch in China. With China’s completely separate, complex and fiercely competitive eco-system many product launches simply don’t get off the ground and can waste invaluable time, energy and capital.
For the savy business e-commerce in China is a lucrative game but an intelligent approach needs to be adopted. Here are the secrets you need to know in order to make your product launch a success and drive sales whilst achieving Return On Investment.
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Tmall & JD.cn are not ‘magic bullets’ and require large-scale investment
Serious, large global brands all seem to have a presence on Tmall and JD these days. And rightly so. Tmall presides over 75% of the market place whilst JD sits on 20%. Both sites have developed a similar model where brands can ‘host’ official stores on the sites with access to the back-end/sales analytics etc.
A presence on these sites is certainly strong for exposure but requires an investment of between 3-5 million RMB for Tmall in order to have a real impact. Half of this is required for technical store, sales & distribution management whilst the other half is required for branding and marketing. JD is about half the cost of Tmall but evidently has a much smaller market share, it is a stronger proposition for electronic products or gadgets so choosing which platform is best depends on your industry sector.
Tmall Global is not as effective as Tmall
Tmall Global was all the rage a year ago but in reality drives less traffic. The benefit of the platform is still that it allows brands to open a store without the official business licences in China but for serious players launching first on Tmall Global is a step to test the market before integrating the store onto Tmall, transferring accounts from the Global division to Tmall’s main site is relatively easy. (further information here)
Many brands are refused by Tmall & JD
This is the reality, indeed 80% of brands are refused by these two main platforms. The reason? The brand are not already established, they do not have the budget or local competitors already dominate your sector. It is a sphere for large scale investment and without this these platforms cannot guarantee sales, they can certainly drive traffic but not necessarily sales. They are not a ‘magic bullet’ for selling into China.
The reason for this?
In China Branding is Everything.
Branding: a number one priority for products
Branding in China really is everything. The Chinese buy brands, they buy what gives them ‘face’ or status in their social group. Despite what you may constantly hear the market is actually very wary of embracing new products with ‘earlier adopters’ less common in China than other Asian markets.
The answer therefore is you need to invest in branding and building your e-reputation online. If you have a mid-range budget it needs to be spent wisely on marketing the product range in the right way. Consider what your appeal to the Chinese consumer is and what differentiates your offering in their eyes. Partnering with a local specialist in this field to devise China specific strategy is integral.
‘International’ products remain highly popular
China is a market typically associated with fakery, there have been a number of clamp downs on this with dominant E-commerce players such as Alibaba evicting many thousands of sellers.
Despite this counterfeit products are still rife and branding your products as ‘international’ is important, it has become a byword for quality and sets you apart from local, domestic competitors. There is of course a real thirst for international products as rising disposable incomes brings about a widespread change in consumer behaviour.
Be realistic about your positioning in this market & set your product apart with a European, American or Australian aesthetic (for example).
So what can small-medium sized brands do to enter the market?
This is a question I am commonly asked after explaining the enormity of leaping straight onto JD & Tmall. Yes it is the end goal for any serious brand to be selling large quantities on these sites and you can with the right long term strategy but first you need an intelligent series of stepping stones.
An intelligent series of steps:
Haitao (cross border platforms)
‘Haitao’ are cross border platforms such as ‘Little Red Book’ or ‘Mad Hatter’, they are increasingly popular apps that specialize in niche markets and smaller brands. You are more likely to find ‘early adopters’ shopping here on these highly social commerce platforms. Users can chat, post images of their purchases and view others ‘shopping profiles’ ideal for marketing and communication purposes.
Still approximately 40% of brands are refused from these platforms, again because of a lack of branding, awareness and prior sales.
‘Daigou’ or Personal Re-Sellers
This can be very effective for new brands, you can sell products at near wholesale price to re-sellers who then promote and distribute the product amongst their communities.
This is positive because it validates the products, starts facilitating sales and also functions as a promotional tool. Evidence of initial sales when you approach cross border platforms is important. Re-sellers can be incentivized to promote the product on their social media accounts with an attractive initial price, these are entrepreneurs at heart and brand themselves as connoisseurs when it comes to selecting the hottest new trends in their social group.
Opening a ‘Taobao’ International Shop
Although Taobao has historically had a worse reputation this is changing after a high profile crack-down by Alibaba on poor quality sellers. Taobao acts as a C2C/B2C store where you can create a store and sell directly. It is lower cost and allows you to improve your visibility with a well designed store.
On Taobao & indeed on all Chinese e-commerce platforms product pages should be long and detailed, this helps for SEO (search engine optimization) and is seen as reflecting a qualified, authentic company if the product pages are expansive & detailed.
International brands can also utilize ‘Taobao Distributors’ to promote and sell the product on their behalf.
Conduct a market survey
A great starting point is to survey both global and domestic competitors, what are their sales figures like and how are they marketing the product? By looking at the range of products available you can understand what your USP is in terms of this market, this may involve tailoring, adapting or changing fundamental elements of the product to suit the Chinese market.
WeChat stores are heading up the trend of ‘social commerce’ that has swept across the Middle Kingdom. They can be connected to an official account and facilitate ease of payment through the WeChat ‘Wallet Service’, at the tap of a screen payment can be made.
WeChat stores will typically host up to 50 product SKU and can be designed to offer ease of shopping, accessibility of product information etc.
Please note that with WeChat stores you have to actively drive traffic to them. There is no commerce social feature yet built into WeChat to find stores, it’s therefore paramount that you are actively promoting the store with an intelligent display strategy & funnel to drive qualified prospects to you.
Branding first. Distributor second
Distributors in China are typically expensive and notoriously selective about the products they take on, they will research a brand for sales, reputation and online presence.
Once you have a reputation Distributors will start to take you seriously and you can connect with quality partners that will elevate the product and push you into stores. A word of warning, Distributors in China do not understand marketing, indeed there is no direction translation for ‘marketing’ in Chinese. Keep promotions and distribution separate.
Developing the brand reputation on:
Baidu Search Engine (Creating a Quality Chinese Site for the Brand)
Community Forums (such as Zhidao or Tieba) – These always rank highly on Baidu as they are offshoots of the brand, positive, or negative sentiment here will rank highly.
WeChat/Weibo – Use this is a Launchpad for content and user to user interaction. All serious brands are expected to be on WeChat.
PR- Appearing in the Chinese e-media is important for your reputation, what stories are you spinning and how will that push/incentivise sales?
Some brands even launch ‘Distributor Campaigns’ to build their online reputation in order to connect with quality distributors. It’s a big commitment so many brands ‘test the water’ first through cross border e-commerce platforms where the regulations are less fierce.
The Chinese e-commerce market is lucrative but fiercely competitive, we are an international agency looking for serious partners to develop our mutual interests in e-commerce. For more information please get in touch with our expert team.
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