Tips to avoid losing money in your E-commerce Project in China

Today, I will talk about a thorny and taboo subject. Even if in China, e-commerce is booming, this market is not profitable for everyone. Some people earn money and succeed, but a lot of people lose money in their e-commerce project in China.

Why?

1 – It is difficult to attract visitors to one’s shop online.

2 – The acquisition cost of visitor is higher day after day.

3 – Chinese consumers are looking for good deals.

4 – While big brands succeed in standing out from the crowd, new brands face many difficulties.

5 – It is difficult for brands to understand China’s e-commerce ecosystem.

6 – Chinese consumers are usually not loyal.

In this article, we will talk about these different problems.

1 – Make one’s e-shop known!

ecommerce-China 

It is difficult for a new brand to make its e-commerce website, Tmall shop or other e-shop known in China, especially the first years of its activity. Today, the big actors invest massive amounts to generate traffic. Online or Offline, these e-commerce giants – Jd.com, Taobao, Yumi, yihaodian, dangdang, Yesmywine, jumei etc. – raise price on search engines. These digital giants aim to acquire market share before thinking of profitability, thus their investments push online ad prices up. SEM (paid referencing) becomes more and more expensive to the extent that it is now difficult to reach the “zero” profitability threshold. Offline solutions can be a useful acquisition channel but we can notice a high loss between printing rate and connections.

To succeed, it is important to find online and offline ingenious ways to make one’s online shop known

  • Work on IWOM (Internet Word of Mouth)
  • Create buzz, focus on viral operations
  • Create some events
  • Call upon stars (or future stars) and KOL (Key Opinion Leaders)
  • Make Tribal Marketing (integrate online communities)

2 – The increasing acquisition cost is becoming a headache

For any online channels, acquisition cost is higher and higher.

ecommerce-china-traffic

 

Social networks are less and less efficient.

-Sina Weibo used to be a very useful platform, but is now losing efficiency. It has been the victim of its own success and attacked by China’s government. As a result, the social network has lost many loyal web users because of some account removals and censorship on buzz. Many communities and opinion leaders have fled. Today, the link between Weibo and Alibaba’s e-shop generates CPA (Cost Per Action), which can be interesting.

-WeChat is a booming platform but cannot be used for viral operations. The impact of publications is very limited and users do not follow links. Today, Chinese consumers are not interested in following brands on WeChat and do not want to be disturbed by advertising.

Forums and QQ discussion groups, where consumers share good deals and tips, remain quite efficient, but an aggressive and intrusive advertising is quickly banished.

On search engines…

SEO’s efficiency on Chinese search engines remains unequal. On competitive keywords, Baidu monopolises results with Pay Per Click: its own products are put forward. You have to be clever and use keywords which are not used by Baidu and generate traffic at the same time.

Competition is very high, because other websites have already been working on their referencing. Thus, it is difficult to outpace a website which has already employed 20 people working on its referencing every day for 5 years.

Being referenced on the other Chinese search engines may be an effective strategy. For example, 360search is  highly used by “geeks” and useful to sell high tech products.

Referencing on mobile is also a strategy which can be very effective (the algorithm is a little bit different).

3 – The quest for the lowest price

Chinese consumers are highly focused on prices and discounts, and it is even truer when they buy on the Internet, because they can compare everything. They can find all the websites which offer the same product.

Chinese web users are better informed and always looking for good deals. Most of online consumers are the ones who live in second- and third-tier cities: their purchasing power is limited.

The others, wealthier, prefer focusing on security but still care about prices. That is why these buyers are often ready to go to Hong Kong to obtain a 20%-discount on products (reduced VAT).

It is often difficult for a brand to grant discounts because if its prices are lower on the Internet, it is risky for its traditional distribution channel.

Today, every consumer can compare prices on the Internet with their mobile while being in a shop…

Offering expensive products (with no discount) is not the good solution. If the prices offered by your competitors are cheaper, your reputation will decrease and your sales will remain very low.

ecommerce-price-china
4 – Work on one’s online branding

Big brands succeed because they already have a good image and notoriety… On the contrary, new brands (or brands which are unknown to the Chinese public) must work on their branding.

It is important for a brand to make itself known and work on its notoriety and image. These actions should be both online and offline because in China, everything is linked.

Thus, a brand should create a lot of events, reach followers on WeChat and Weibo or reach visitors and engage them by showing them its products physically.

Why Chinese buy brands rather than low cost products? For their own reputation, show off, quality and security. Thus, you should be able to offer what the users want.

Working on one’s image allows to benefit from a viral effect at the time of purchase. A Chinese consumer will spontaneously publish its new acquisition on social networks.

chanel

On the contrary, selling one’s products without any branding is very difficult because it means being able to offer the lowest prices and in China, there will always be at least one company to offer better prices than yours.

5 – China’s e-commerce ecosystem

There is one thing you must know and understand: China’s e-Commerce ecosystem.

ecommerce-china

Why is it so complex? Because it changes depending on the universe of products.

A Chinese woman will buy her clothes on Taobao, a TV on Jingdong, food on Yihaodian, book a massage session on a groupon website, a restaurant on Dianping, test some cosmetics products on Jumei and order them on the brand’s Tmall shop to avoid buying fake products. Then, she will make an impulse purchase on VIP shop because she really likes the clothing item and because there is a big discount on it, and she will book a hotel on Ctrip.

She is interested in online women’s press, advice from her friends, products testing by the KOL (Key Opinion Leaders) she follows, will follow discussions on forums about the most fashion European brand, will be jealous of her friend’s new Hermès bag or will feel like going to Provence thanks to a TV series.

In China, market platforms are highly developed and essential to do online business. Having a website serves as a showcase and allows increasing one’s sales volume: the consumers who are looking for security will buy the products.

A website is necessary, but must be integrated into an overall e-commerce strategy.

Advertising investments must be varied. Multiply operations on several market platforms will allow being more present and increase sales volume.

Xiaomi has understood this. The brand has sold 150000 smartphones at one go on WeChat, has made 552 million Rmb within 25 hours on Tmall and conducted big discount operations on JD.

Xiaomi ecommerce chine

 6 – Chinese consumer’s loyalty

Chinese consumers do not remain loyal to a brand. They will usually be attracted to discount operations, following a desire (impulse purchase) or a need.

They will buy again in sympathy with the seller, the person they know, but they will not buy to be loyal to the brand or company.

On online platforms, it is even more the case: Chinese consumers will always compare offers. One day, they buy some clothes on a shop but the day after, they will buy other clothes on another shop, following their instinct.

It is very difficult to engage Chinese consumers and make them loyal, especially on the Internet, where they can move from one website to another.

How to make Chinese consumers loyal? Some brands have found solutions:

  • VIP member with advantages
  • Grant discounts on a regular basis
  • Community Management and reward buyers
  • Organize events to create a contact between the person who represent the brand and the customer
  • Little extras, personalized gifts and messages

Conclusion:

Today, the e-commerce market is highly promising and advantageous for companies. This allows limiting distribution fees and staff, reaching consumers more directly, controlling distribution…

However, an e-commerce project requires a minimum amount of investment, especially in China. Why?

  • Being integrated into platforms represents a cost
  • Being able to acquire visitors (and thus potential customers) is more and more expensive
  • Grant a discount or offer low prices is a must to make consumers buy
  • Focus and work on branding is a must to earn customers’ trust and to make one’s website and the brands we sell online known.
  • Chinese consumers are not loyal to a brand and even less to a website…

Whatever your field of activity is, we can help you to conquer China’s e-commerce market. We do not cover any field, but we can refer you to other specialized companies like our agency.

Why customers call upon our services:

customer question

 

To increase their visibility thanks to SEO and integration on social networks

-To make their shop known, gain in popularity, launch their activity thanks to buzz marketing strategies

-For Relations Press or KOL (Key Opinion Leader) operations

-For consulting and online sales estimates

-To coordinate their integration on the different market platforms

-Because we are reactive and dynamic, and these qualities are important to succeed in China’s digital world

-As we live in China’s digital world, we understand it. Thus, our team is expert in this area.

-To lead a Content Marketing strategy or for translation, blogging, photos and videos

Here is our agency website specialized in e-commerce in China!

 

Other articles about e-commerce in China:

Don’t hesitate to ask questions! I will answer relevant questions.

Olivier VEROT
Gentlemen Marketing Agency