Bigger than big opportunity
China e-commerce retail sales totalled $900 billion in 2016 and are expected to top $2.4 trillion by 2020, exceeding Europe and the USA combined. There are opportunities for Western companies to sell China-produced goods in China and also Western-produced goods in China (the latter are known as “cross-border” goods). Approximately 40% of China consumers online bought foreign-made cross-border goods totaling $87 billion in 2016.
When it comes to platforms and payments, there are some nuances in the China market to plan for and manage.
Platforms are different in China
The platforms that we are used to in the West like Amazon.com just don’t have the same foothold in Asia. Amazon in China actually has a very small percentage of the total market. By small, we mean low single digits. The names that you might not be as familiar with like TMall and JD.com are less known to Western companies, but they are very big platforms in the world of China e-commerce.
Getting your products on these platforms is a critical step to help grow e-commerce revenue in China.
Payment methods are different in China
Traditional payment methods that we have in the West—like credit cards—are not that popular in China. The preferred payment methods (as of this writing) are as follows:
- Alipay, launched in 2004 by the Alibaba Group, owner of e-commerce platforms Tmall (formerly Taobao Mall) and Taobao (eBay-like consumer portal).
- UnionPay, run by China’s top four state banks.
- Tenpay, a unit of Tencent.
It’s all about making it easy for the customer and giving them options with which they are comfortable.
Here is a high-level summary of steps for incorporating two popular payment methods into a website, specifically Alipay and Wechat.
- Alipay
- Finalize your website and customer shopping experience.
- Confirm your Alipay account is ready.
- Complete Alipay real-name authentication.
- Select an Alipay payment package.
- Submit a contract online.
- Make a test payment.
- Achieve application approval.
- WeChat
- Finalize your website and customer shopping experience.
- Set up a WeChat public account and request verification.
- Submit required company documents.
- Achieve verification approval.
- Finalize WeChat program development.
- Sign the contract and make a deposit.
How much does it cost?
Each case is unique, making it hard to estimate. A large percentage of the cost depends on the amount of programming you’ll need to do to create a smooth user experience on your website. Programming in a recent project we completed for a client consumed 80% of the total costs.
How long does it take?
Plan on about two weeks to set up either payment system, assuming you have your company documentation in order as well as web developer familiar with your website’s structure.
Are special certifications required?
No, other than the standard company documents you need to submit during the Alipay or Wechat application process.
One important parting note…
It should be noted that your website may not be the preferred way consumers want buy your solution in China. China is a “low-trust society” and as a result most consumers prefer to use large commercial e-commerce platforms like those listed above. The space is evolving rapidly. In 2016 WeChat evolved as a serious platform contender and is expected to challenge e-commerce giants like Tmall and JD.com in the coming months. Flexibility and agility are operating imperatives in China.
Ready to ramp up revenue with e-commerce in China? Contact Paul Stepanek, President of CMD, to get a step-by-step guide.