Understanding and settling on the E-commerce market in China

 

Executive Summary

 

According to a report released by Mc Kinsey in 2012, China became the world’s second-largest e-commerce market, with about US$190 billion of revenues. Since ten years, the annual growth rate of Chinese E-commerce has increased over 100 per cent.

china_ecommerceMoreover, the country’s retail sector has known a strong emergence and it became one of the most wired e-tailing commanded with an increase more than 5 to 6 per cent of total retail sales in 2012, while the United States had only 5 per cent.

 

Henceforth, China can count on 242 million Internet users who purchase goods online. Moreover, the forecasts show a strong increase reaching over 420 million of online buyers in China in 2016.

In 2010, 23% of China’s urban population shopped online and they will be nearly 44% in 2015.
According to a report by the China Internet Network Information Center (CNNIC), each customer spent an average of US$ 843 per year and the most frequently purchased items were clothing and shoes (81.8%).

 

In accordance with a study of Forrester Research, these last years, western companies are very interested by the Chinese e-commerce market due to a burst of online sales in China. Western companies want to elaborate successful e-commerce strategies in order to introduce on this productive market. Investors from worldwide search solutions and opportunities in order to integrate this big e-commerce market.

 

China’s Ministry of Commerce anticipates that China will soon overtake the U.S. as the largest online shopping market.

 

Implementing an e-commerce strategy on the Chinese e-commerce market is not easy. It is necessary to take into account Chinese cultural traditions, some specifics techniques and to understand Chinese legal landscape.

 

 

East-West Cultural Differences

 

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China has more than 1.3 billion inhabitants and Chinese people are a culture and a political very separate of the rest of the world.

Thereby, it’s essential for western companies to collaborate with local teams, native speaking implementation partners in China at the beginning of their e-commerce development process.

 

It is very important to take into account the difference of culture and language in order to avoid misunderstandings concerning objectives, technical, legal, political and governmental issues which can result in project delays and cost overruns.

 

Team members from western should invest time with Chinese colleagues in order to ensure clearly of planning of conception and design phases. In-person interactions are paramount to cultivating relationships and ensuring clarity of direction.

 

In China, nearly 90 per cent of Chinese electronic retailing take place on virtual marketplaces where manufacturers, large and small retailers, and individuals offer products and services to consumers through e-commerce platforms such as PaiPai, Taobao, and Tmall. All these big virtual platforms belong to bigger e-commerce groups. A large network of third-party service providers to these e-commerce groups to offer payment fulfilment, delivery and logistics, customer service, and IT support.

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On the contrary, in Western countries, the dominant model of e-commerce is the brick-and-mortar retailer like Best Buy, Carrefour and Wal-Mart, or pure-play online merchants like Amazon. Companies run their own sites.

In China, such merchants account for only 10 per cent of e-tailing sales.

 

Consumer Behaviours

 

In accordance with a report from Forrester Research, China knew a increase significantly concerning the online retail market. Indeed, Chinese E-commerce market won $118 billion in 2011 and the forecasts for 2016 are about $356 billion.

 

This rapid growth of Chinese E-commerce market has resulted the onset of numerous purchasing trends; it’s why the online retail companies had to establish strategies to supervise, to evaluate and to manage the customers’ behaviours.

Chinese online clients are mainly interested by discounted goods, special sales and promotions.

Online shoppers in China are attracted by exclusives offers with competitively price goods.

Moreover, over 40 % of online customers are accustomed to using social media, and blogs to follow the last trends or promotions of their favourites brands. They read and post their impressions about services and products but also they use social media to express their testimonials and to solve their pre- and post-sale problems.

 

Last point concerns the interest in purchasing online thanks to mobiles. Thereby, brands have to take in account the fact that the mobile transactions are increasing significantly and they have to integrate a mobile buying solution.

 

To sum up, it is very important for companies and brands to listen to the customers’ recommendations and to understand trends and buying behaviours in order to answer to meet all the needs of shoppers online.

 

Strategy

 

The challenge for all retailers that want to make online sales is to elaborate the successful strategy for Chinese shoppers. The action plan is developed in 3 parts:

 

– Establish a trust relationship with the customers valuing them or associating its brand with Chinese celebrities. Online retailers have to build a customer dependency.

 

– Stay connected online, offer solutions to all customers’ demands, interact with its online community and supervise its e-reputation (Social media, blogs).

 

– Provide exclusive services: different means of payment and delivery.

 

 

Most powerful B2C platform in China

 

Government Regulations and Compliance

 

E-commerce platforms in China progress in a specific legal system. Indeed, Chinese government supervise all E-commerce environment particularly international companies planning to sell online goods in China.

So, for international online retailers wishing to do business in China, it is advised to collaborate with a legal counsel who will help to navigate into the Chinese bureaucracy.

 

These last years, it was illegal for foreign companies to conduct retail online in China, so it was very difficult for international enterprises to get the Internet Content Provider (ICP) license in order to sell online. Moreover ICP license is a complex process because all papers are in Chinese language hence the importance of the assistance of local counsel to set up online sales policies (Sales terms and conditions, policies for returns or exchanges,…)

However, Chinese official policies are changing.

 

Conclusion

 

Ecommerce in China is complex, unlike any other country and in a constant state of growth. But understanding Chinese business practices can improve your Chinese ecommerce strategy.

article proposed by QP sofware

At QPSoftware we can help and assist your company for build a successful Ecommerce website in China.

 

References

 

 

 Marketing2China