Commerce – A Solid Strategy is Needed for Success
The Chinese Retail Market is one of the most – if not THE most – coveted markets in the world. According to eMarketer’s latest worldwide retail and ecommerce forecast it will, for the first time, surpass the US by more than $100 billion, with its total retail sales will growing 7.5% to $5.636 trillion. In contrast, US retail sales will grow just 3.3% to reach $5.529 trillion.
Ever since China opened its borders to cross-border e-Commerce a few years back, this has become a common avenue for retailers and brands to enter the Chinese market. Chinese consumers, especially in large cities, are looking for quality products and brands from across the world. But there are challenges. How can brands and retailers from the UK navigate these issues and reach Chinese consumers? Let’s take a look.
How to enter the Market: There is no ONE right channel
When asking the question of how to get to Chinese consumers, the answer several years ago would have most likely been TMall or JD.Com. The marketplaces were the only place where Chinese consumers used to shop online, and these platforms have a large consumer base. These large marketplaces, however, have cost many retailers and brands a lot of money. The large number of brands and products mean that ad bidding costs have gone through the roof. Additionally, shoppers on marketplaces buy by price, not because they favor a certain seller. Building a relationship with customers is difficult in this kind of environment.
Furthermore, there are many other channels that Chinese consumers use to get inspiration and information today. And – as opposed to a few years ago – there are as many channels where they purchase the products they covet today. Brands should adopt a multi-channel strategy to reach different kinds of customers on the respective channels their target group shops.
Design your strategy around localisation
China is not one homogeneous market and approaching China as one single market is a mistake. It is, in fact, incredibly diverse – encompassing many ethnicities, a vast land mass, and cultural and societal differences between its regions.
UK apparel retailer ASOS ran into some of these issues when it imported apparel that didn’t fit the tastes of Chinese consumers. First of all, Chinese women prefer to purchase casual dresses. Second of all, their body types are much slimmer than European women. ASOS’ product selection simply did not match up.
But localisation also means looking at the style and user interface of Chinese online shops. The differences between the European and the Chinese market are striking. Look at any Chinese shopping channel and you can see that colours and images are much more playful and colourful than they are on European web shops. While we try to limit product descriptions to only the most relevant information this is not the case in China. Chinese consumers are wary about fake products and authenticity, and as a result 10-20 pages of information about a product are provided.
Go mobile or go home
Modern Chinese love their smartphone! You will rarely see a Chinese without his mobile phone, because he organises his life with the small device – and telephoning plays a subordinate role. He chats, shares moments from his everyday life, orders food home, buys food, clothes or medicines and above all: today’s Chinese pays with his mobile phone. Mobile payment is common practice and even at the weekly market you can pay for fruit and vegetables with your mobile phone. Having an e-commerce store that is adapted to mobile views is very important.
And then there’s WeChat. As China’s most popular app, WeChat has more than 1 billion active users – that is more people than the entire population of Europe. Retailers should use WeChat to market to Chinese consumers because it is the social network of choice for e-commerce customers. Now, more and more brands are even setting up WeChat mini-stores to take advantage of WeChat’s organic user traffic.
Stay on top of cross-border regulatory changes
In recent months the Chinese government has issued a slew of new regulations, changing up the game for both gray-market “daigou” sellers and those selling through cross-border e-commerce.
For one, China’s new comprehensive e-commerce law (effective since January 1st, 2019) cracks down on “grey-market daigou sellers” by forcing them to register as businesses and file tax returns. If you’re a retailer that relies heavily on these “daigou” for your revenues, you should consider alternatives because this market is likely to shrink in 2019.
China is also expanding the scope for cross-border e-commerce because this channel can be better tracked and taxed, when compared to gray-market daigou purchases. It also makes it easier for the government to regulate and protect consumers from fake goods, since they’re purchasing directly from overseas brands and retailers.
In November, the government raised limits on CBEC purchases from 2,000 RMB per transaction and 20,000 RMB per year to 5,000 RMB and 26,000 RMB, respectively. The government at the same time lowered import duties on inbound postal shipments. Postal duties for the top two tax brackets were reduced from 30% and 60% to 25% and 50%, respectively.
These new developments indicate that the environment for international retailers and brands will remain attractive for the foreseeable future. Those interested in the market should, however, do their due diligence and be wary of the various challenges that entering China may pose.
Azoya is a global e-tailing group that sets up and operates e-commerce businesses for international companies in China. Based in Shenzhen, its staff of nearly 300 employees is dedicated to carrying out day-to-day operations, which include merchandising, marketing, logistics, payments, customer service, and more.
By Elena Gatti, Managing Director DACH Azoya International