As China’s cross border eCommerce market matures, Hot Pot Digital discusses the most effective route to sell to savvy Chinese consumers.
China’s eCommerce landscape is changing – let’s start with some arresting stats:
- By 2020: 60% of global eCommerce value will be generated by the Chinese consumer
- By the same date, cross-border eCommerce is expected to surpass $1 trillion
- 1/3 of Chinese consumers in Tier 1 cities have already made a cross-border purchase online
Driving this trend is consumer demand for products unavailable in China and a desire for trustworthy high-quality products, free of risks such as counterfeiting.
Until recently, the overwhelming majority of cross border purchases took place on third-party marketplaces such as TMall Global and JD International. This is due to a combination of consumer familiarity with the purchase, payment and delivery process, as well as brands’ perception of entrenched marketplaces as the most convenient and dependable way to sell to China.
For certain product categories – such as FMCG – it is still the case that Tmall and JD.com’ cross-border offerings are extremely effective routes to reaching Chinese consumers.
However, brands are increasingly learning that domestic Chinese marketplaces are no longer the only way to start selling online to Chinese consumers, as familiarity and trust with brands’ own stand-alone “.com” sites grows.
Nearly one-fifth of China’s digital consumers regularly buy from eCommerce vendors outside of China, according to a recent report by McKinsey. These new attitudes are being forged by an increasingly internationalised Chinese consumer – through increased travel, overseas education and peers’ international migration.
All the above factors drive a normalisation of buying from overseas sites and a willingness to go “straight to the source”, removing the need for a Chinese intermediary or platform. As Hot Pot Digital has covered in a previous article, 38% of shoppers in Tier 1 cities and 27% in Tier 2 have already made cross border purchases online.
What does this means for brand’s China market entry strategy? Previously, the attraction of partnering with a Tmall Global or JD Worldwide was clear: consumers were already familiar and trusted these large established platforms, distribution and logistics networks were localised of and issues such as customer service could be delegated to third parties. However, these benefits can sometimes be somewhat overshadowed by the disadvantages:
- No data transparency – clients often cite difficulty in extracting quality data from both the platforms as well as local third parties
- Costs – both set up and ongoing
- Less control over branding and of user experience on the platform
- Long and protracted negotiation times with the platforms
- Similar/ slower delivery times for cross-border delivery
- Brands’ experience almost entirely governed by their selected TMall partner (quality and service varies significantly)
In a much publicised recent example, Coach, the luxury handbag maker was arguably the biggest brand to pull their flagship store on Tmall in September 2016.
Marketplace issues need not deter brands from entering China. Indeed, based on the increasing numbers of Chinese consumers that are willing to shop from overseas sites, optimising an existing global .com presence for the China market is often the quickest way to run an initial China eCommerce strategy.
With the right measures in place, these forays often result in surprisingly profitable routes-to-market and can help prove the market opportunity for global brands with Chinese consumers. All this without the significant outlay, delay and operational considerations of a Tmall or JD setup.
For the end consumer there are also clear advantages: buying straight from the source, guaranteeing authenticity, and having access to a brand’s full product range are all compelling drivers of the uptake of international .com sites over a watered-down Tmall offering.
Hot Pot Digital advises leading international brands on their China eCommerce strategy and China market entry strategy.
We also generate high-value audiences through targeted social, digital and paid media campaigns.