With a population more than three times that of the United States, China presents tremendous commerce opportunity. On top of that, Disposable Personal Income in China more than doubled over the past decade, from 15,780 CNY ($2,400 USD) in 2008 to 36,396 CNY ($5,500 USD) in 2017. As China’s consumers continue growing wealthier and more sophisticated, Chinese companies are increasingly opening up their markets for foreign companies to sell in China.
These factors draw in more and more companies with the hopes of tapping into a developing market ripe with opportunity. However, despite the promise of significant returns, companies must navigate the complexities that come with doing business in a foreign market – like differences in consumer habits and expectations, regulations, commerce platforms, unique payment systems, communication with suppliers, managing consumer feedback…the list goes on.
We’ve put together an in-depth guide on how to turn these challenges into opportunity.
To be successful in a new market, companies need to understand the key differences and tailor an entry strategy accordingly. Here are three key ways the Chinese e-commerce market differs from western markets:
In developed countries, one in ten consumers looks for customer support before making a significant purchase. In emerging markets, however, that number is closer to eight in ten. Developing countries like China are made up of “low-trust” societies that need more interface with customer service to obtain product or service information before parting with their money. What this means for companies selling to the Chinese is that part of the selling experience must include readily accessible, live customer service. Loss of instant gratification can mean the loss of an order.
Chinese consumers have distinct preferences when it comes to payment methods, whereby traditional methods such as credit cards are uncommon and PayPal unheard of. 85% of their online payments are processed by Chinese payment systems such as AliPay, TenPay, 99bill, and UnionPay. To successfully close transactions, companies seeking business from Chinese consumers must accommodate these expectations in payment platforms.
Although Amazon has made waves in every commerce vertical in Western markets, e-commerce giants, Alibaba and JD.com, have a hold on more than 80% of the Chinese market. Amazon does have a point or two of share, but it’s minimal. Smart sellers focus current efforts on platforms that the Chinese consumer favors and frequents – in other words, the right product placement.
With those key market differences in mind, businesses that hope to thrive in the Chinese e-commerce market need to tailor their selling strategy to those distinct market characteristics. Below are six tips on how to successfully execute:
Due to major cultural differences, a product that does well in a particular market may not do well in another. Before diving in, it’s important that you do your homework.
Look into what industries in general do well in China – and how they’re trending. For instance, as a developing nation, there is an increasing focus on lifestyle goods. As this industry is less saturated than in a developed country such as the US, it is an easier commerce space to break into as it presents more untapped opportunity.
Determine who your potential competitors would be within that space, and look into the traffic they get across their selling platforms. In other words, research other resellers who sell similar products and gauge the success they’re seeing. If they don’t appear to be selling, do some homework before walking away. Perhaps they failed to localize their commerce strategy to the local market.
What market segments are attractive in your home country? Determine your current consumer profile and compare it to that of the Chinese market. Does a similar consumer profile exist in that market in the first place, and if so, is it a realistic target market to go after?
Cultural differences also heavily affect your marketing strategy. As mentioned earlier, Chinese consumers are on different platforms on the web not just in terms of selling channels, but social channels and search engines as well.
As China becomes more developed as a nation, local customers are growing accustomed to buying from foreign merchants. With that being said, foreign companies need to localize their content to meet the needs of Chinese consumers. You can do so by creating a local webpage with content translated into Simplified Mandarin, the common language in China.
Blocked from the Great Firewall, Google’s SEO services cannot be leveraged. An alternative solution is to invest in local search engines such as Baidu and optimize there to drive relevant traffic.
Social channels commonly used in the West such as Facebook are not available to Chinese consumers. Instead, local social platforms such as WeChat or Sina Weibo are mission critical in order to establish a social selling presence. WeChat itself has more than a billion monthly users – it allows retailers to reach mass audiences through social media, SMS, and push notifications.
A similarity between western and Chinese consumers is a demand for options. In today’s competitive consumer market, if a transaction proves to be too difficult, a customer will simply look for the product elsewhere. Therefore, it is extremely important to make the buyer’s journey as simple as possible.
Once a consumer makes the decision to buy, make it easy for them to get the product. In other words, verify a seamless transaction from start to finish. Make buying platform easy to navigate, with clear instructions on how to complete the order as well as what to expect once the order has been placed.
Sell on platforms that your target consumer frequents. Some commerce platforms may be more suited for certain types of product so it’s important that you do your research to optimize product placements. Some platforms are more B2B targeted, others are more about consumer lifestyle. On top of that, another big advantage of using indirect sales channels such as JD.com is the readily available distribution network and consumer base. Going through channels that consumers already know and trust gives your brand more visibility.
In addition to selling through the right channels, it’s important for your brand to show up on search engines when your target market searches for your category of products. Local search engine optimization will help your brand get found and integrated better into the market.
Provide payment options regularly used by Chinese consumers. It is very likely that you’ll lose out on a sale if your customer was unable to complete a transaction because of a payment method roadblock. AliPay, TenPay, 99bill, and UnionPay are a few commonly used methods.
Companies often overlook China’s consumer laws when in the strategizing stage. Doing so may end up costing your organization time and money instead of making a profit. On the subject of compliance, due diligence goes a long way.
Your products brought in from overseas must be able to clear both Chinese international customs and Tmall Global security. They must also bear a certificate of origin.
Local law requires you to offer Chinese language customer support. Customers must have a means to handle returns in China. You must also arrange overseas shipping directly to Chinese consumers if you do not have a local fulfillment partner. After the transaction has been made, after-sale services for handling returns in China itself must be set up in physical locations.
Product descriptions must be in Chinese. Product labels must also use international units of measurement as well as feature customer support in the local language.
China has unique consumer protection requirements. While animal testing for cosmetics is banned in many Western markets, China’s laws require it.
A delivery system with tracking capabilities is required. Logistics services must also begin within a 72-hour window regardless of whether it is via direct delivery or from a local fulfillment center.
Consumer Data Protection: Due to cybersecurity laws implemented in 2016, companies handling consumer data must take specific safeguards to protect it.
Fulfillment centers enable you to outsource warehousing and shipping, hence, relieving you of the need for physical space to store products as well as managing product shipping. All you have to do is send your merchandise to the fulfillment center, and the partner will ship products out to customers accordingly.
Finding a local partner with fulfillment capability will enable you to deliver products to consumers in a timely manner. Having your stock ready to go from your warehouse in China instead of inventory in your home country significantly cuts down your product delivery time, not to mention, cost. Chinese consumers expect very short delivery times, and star ratings (leading to future orders) are tied heavily to instant gratification.
A common issue for many e-commerce businesses is overselling. Merchants end up having more orders for a certain item than they have the inventory to fulfill. While you might think that this isn’t a bad problem to have, it can be damaging in the long run as you risk losing customers to competitors as well as harming your reputation. Confirm your local partner of choice has the fulfillment capability to match your stocking needs.
Especially when you are competing in a saturated market with multiple competitors offering similar products, a key differentiating factor for your business will be the customer experience you provide.
To encourage repeat purchases, ensure that your customers feel that they got value for their money. This entails thinking beyond just the product, but instead about the entire customer’s journey, even after the purchase itself.
Given that one of the key differences within the Chinese market is that it is comprised of a low-trust society, an important part of your commerce strategy needs to be integrating quality customer service. Look into common purchase points where consumers run into issues, and ensure accessible resources to them—in the ways they prefer to interact (live chat, phone, etc.). On top of that, make sure that customer service is easy to seek out at any stage.
To enable that, hire trained technicians based in China to interface with your customers to provide customized solutions to specific problems. There should be multiple points of contact available, namely over the phone, online, or onsite customer interaction. Your brand reputation depends on it.
After the purchase has been made, give the customer real-time information on what to expect next. China’s consumers expect online tracking of shipments. Lead time in China is measured in days, with consumers in urban areas expecting next-day, and even same-day, delivery. In some cases, consumers also expect to be contacted to confirm satisfaction of product delivery. Due to this, it is important to select a reliable logistics partner that has the capability to deliver safely and on time.
In China’s market, consumer decisions are heavily dependent upon ratings. Businesses that achieve five-star ratings are those that focus on building long-term relationships. Chinese consumers are likely to form loyalty towards brands they trust and have had positive experiences with. This is key to nurturing repeat business, as well as encouraging referrals, which is a vital aspect of your marketing strategy. Five-star ratings also depend on hassle-free order fulfillment and payment processing.
China’s population is not only growing in numbers, but in disposable income as well. This presents tremendous e-commerce opportunity for companies looking for new markets to expand their product reach to. However, due diligence must be done before diving in.
Importing your brand promise to an unfamiliar market such as China can be a tall order riddled with complexities. Success lies in the ability to understand the differences that exist within the market and to tailor a commerce strategy accordingly.
With decades of experience, CMD’s experts stand ready to help you strategize and execute your China e-commerce plan. Ready to accelerate?