Updated in 2016 to reflect current trends and statistics.
Chinese consumers have broken the online world record again. Single’s Day on Nov 11, or ‘11,11’, saw China’s online retailers slash prices by up to 70%, drawing shoppers in their droves. On China’s TMall and Taobao alone, Chinese filled their carts with $3 billion of goods in 24 hours, eclipsing the $1.25 billion record US retailers did on Cyber Monday. And that’s just a taste of things to come.
Below are five reasons why you should be on the Chinese e-commerce wagon and some rules of thumb for riding it.
1. China’s Market is Huge and the Potential is even Bigger
China has become the world’s largest auto market. There are more smartphones sold there than anywhere else; more groceries, beer, antiques, and art. In 2015, online retail sales in China totaled $581 billion, a 33% rise from 2014.
A growing portion of China’s 1.4 billion people are making discretionary purchases every day, and it’s showing no signs of stopping. By 2020, BCG forecasts there will be 280 million affluent consumers in China with a disposable income of $20K to $1m. Between now and then, average incomes will have tripled, if not more. In short, whatever you’re selling, it’s hard not to take notice of China.
2. E-commerce is Taking China by Storm
E-commerce in China has become a multi-hundred-billion-dollar-
3. Chinese Consumers Love Western Brands
Just as Chinese consumers love to shop online, they love buying western products when they’re there. Western brands are generally perceived as higher quality and safer, with more ‘cool-factor’.
According to BCG, 61% of Chinese would pay more for US-made products. In certain categories, the preference is even higher. The World Luxury Association found 86% of Chinese consumers refuse to buy luxury goods labeled “Made in China”. 61% of Chinese have less confidence in local food than in 2011, and 28% expect to replace their domestic purchases with imports says Ipsos.
4. Reducing the Risk of Fakes
Chinese shoppers are less trusting than consumers elsewhere. And that’s with good reason. China is crawling with fakes from the well-known replica handbags and watches, to bogus Subway restaurants and until recently, fake Apple Stores, where even the staff were fooled.
To counter that, China’s most popular business-to-consumer website, TMall, only sells products directly from a brand owner or authorized distributor, meaning consumers can shop with the confidence of buying the real thing. That bodes well for foreign brands who are much more likely to be copied.
5. Reaching the Inaccessible Masses
Another drawcard for e-commerce is that it reaches markets that can be difficult and expensive to service otherwise. 75% of China’s affluent middle class live in ‘smaller cities’ you’ve probably never heard of, and most of those cities don’t have the brick and mortar stores stocking the foreign brands they want. So they buy them online. There are close to 200 cities with over a million people in China, and going online is the easiest and most efficient way to reach them
No one will pretend that China is an easy market. But if you’re serious about wooing the hundreds of millions of potential consumers, you’ll have a much greater chance with a solid e-commerce strategy.
Tips For E-commerce Success in China
Here are some broad-brush rules to remember if you’re selling online in China:
- Presence on established e-commerce platforms should be part of your strategy to reach the large portion of the market who rarely shop elsewhere. The biggest player, TMall, accounts for 45.1% of online B2C sales and 360buy is 17.4%
- Social media such as Sina Weibo is intimately tied to with online shopping and should also be a key pillar in your plan. 85% of consumers frequently use social media to share their online shopping experiences and 55% have participated in a discussion about a foreign brand.
- Service is important for Chinese customers who often chat or call before making online purchases. It is best if you’ve got someone to respond to queries when Chinese are online shopping– 7-8 in the morning until midnight is a good guideline.
- Quick Delivery is something online Chinese have come to expect when shopping online. It should be one to two days if they’re buying something close to their city, and a few days if further away.
- Payments are not like in most western markets where credit cards are widespread. You’ll want to offer the trusted Alipay and methods such as cash on delivery.
- Your website is not only imperative to online sales, but also offline sales. 37.6% of Chinese consumers regularly increase their brand awareness through websites and a further 47.5% claimed official websites increased their purchase intent; much more than the traditional channels like TV, radio, and newspapers (see my previous article about getting your website right in China).
The Chinese market is always changing and there are no 100% fail-safe rules for selling in it; but if one thing’s certain, it’s that you should be selling to them online. Good luck!
Image Credit: China TMall – courtesy © Delphimages – Fotolia.com
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