Home Tech eCommerce The Changing Face of e-commerce in China

The Changing Face of e-commerce in China

While China offers Australian exporters unprecedented opportunity in terms of potential customers, entering the market doesn’t come without risk. One cost-effective way for Aussie SMEs to sell to our biggest trading partner without having to establish a physical presence is through e-commerce. 

Selling online is a popular way to test how a product will be received in a new market. China is only one of the myriad countries to consider, but with a population of over 1.4 billion, it’s a difficult market to ignore.

As well as assessing the political winds, every company needs to review its resources and strategic imperatives before deciding whether it’s the right time to establish sales channels in Asia.  But it’s worth noting that there has been strong growth in the Chinese market in 2020, despite the outbreak of the COVID-19.  Forbes reported that before the pandemic, 35 per cent of China’s retail spend was via e-commerce, and this will have jumped to 50 per cent by the end of 2020.  

The export journey

“You go in steps on the export journey,” says Dianne Tipping, Chair of the Export Council of Australia. “What often happens is that a business has a website and sells domestically, and then all of a sudden, its products gets picked up by someone overseas. Then the business looks at the size of the overseas market and realises that this is 7.8 billion people compared to 25 million in Australia.

“There are several ways of selling online, and I recommend firstly creating a website suitable for an international market,” says Dianne. “All the usual rules apply – the website should be easy to navigate, feature current content and high-quality images, and be mobile optimized. It needs to explain your products and tell your story, something that is difficult to do in a crowded online shopping mall.”

Even with pay-per-view marketing, driving overseas traffic to your website takes time to build up. Dianne says that’s why many companies adopt dual systems: a payment portal on their website for direct sales, and a presence on an established platform with a large customer base.

The good, the bad, and the profitable of Chinese e-commerce

A major advantage of entering the Chinese market via e-commerce is that the barriers to entry are generally lower than a bricks and mortar presence. The setup costs, regulatory compliance, and customer acquisition can also be significantly cheaper and faster than when a company establishes a physical presence. 

The sales potential in China is undeniable. Euromonitor reports that in 2019, China’s e-commerce sales reached USD $1.47 trillion, or 37 per cent of global e-commerce sales. However, the ease of participation has resulted in a crowded market, so for some brands, a hybrid model where e-commerce can open the path to bricks and mortar is preferable.

The most successful retailers in the large Chinese online shopping malls are the brands that control the narrative.  E-commerce requires significant attention to marketing and communications and constant engagement. The popular retailers cultivate a community of loyal customers who ultimately feel a part of the brand’s success.

“The Chinese online portals are very busy, and it’s hard to stand out,” says Dianne. “You have to have good photography and well-worded product explanations, and maybe something extra like a video or an online blog.”

There are several things to consider before entering the Chinese market. Registration of all intellectual property (IP) is crucial, including trademarks and marketing collateral. China is a first to file jurisdiction for IP, making early registration essential. And managing IP security is necessary.

The people you choose to partner with is the most important choice you will make for your China market entry strategy. The right partner can assist with fulfilment, payment, and will help quantify your costs. China is generally not a cheap place to do business, so having a well-considered market entry strategy is essential. 

“It is critical to make sure you work out a logistics plan before you start selling,” says Dianne. “This is particularly important during COVID-19 when the prices of air movement have increased, and the availability of air movement has reduced.”

Which Chinese online shopping mall should I select?

When it comes to B2B portals, they don’t come any bigger than global juggernaut, Alibaba. The Group runs several e-commerce platforms, including Alibaba.com (B2B), Taobao (C2C), and TMall (B2C). 

But there are many alternatives portals for Australian exporters to consider. JD.com, which competes directly with TMall, allows Chinese consumer to buy overseas products through its cross-border service, JD worldwide. Sites like Pinduoduo and Vipshop compete on price and are suitable for products that can be discounted. There are also specialty Chinese marketplaces; for example, Austrade has a list of the portals that sell imported food and beverages.

When it comes to choosing the best online environment, it’s a case of horses for courses: Australian exporters need to research the different portals and decide which will be the most suitable for their products. It’s important to note that brands need to be ready for several years of investment before starting to win in this market.

Are my products suitable for the Chinese market?

Australian products have a reputation in China for being pure, eco-friendly, safe and of high quality, and the pandemic has only served to increase the country’s desire for these attributes. The most successful Australian brands in China are those that have leveraged these strengths.

“Chinese consumers have a high demand for ‘clean and green’ products,” says Maggie Zhou, Managing Director, Alibaba Group (Australia and NZ). “Many Australian brands and products excel in this area, particularly when it comes to products such as healthcare products, healthy packaged and snack foods, and natural cosmetics. 

“As a result, Australian businesses continue to perform well on Alibaba Group’s platforms,” Maggie continues. “In fact, during last year’s 11.11 Global Shopping Festival, Australia was the fourth most purchased from country, with Australia’s Swisse and BioIsland brands ranking in the top five most popular cross-border brands by Gross Merchandise Volume (GMV).”

Breaking the figures down by the number of buyers, Maggie says, “The results showed that the top 10 product categories among Chinese consumers buying cross-border from Australia included health supplements, adult milk powder, infant and toddler nutrition, emulsion, powdered drink mixes, dairy products, facial masks, baby toiletries, and facial serums.”

Understanding Chinese mobile consumer behaviour

E-commerce has delivered products from around the world to the smartphones of Chinese consumers, and their loyalty is hard-won and fleeting. The convenience of online shopping makes it easier for consumers to discover you, but also easier for them to discover your competitors. 

Chinese consumers, particularly younger consumers, generally have lower levels of brand loyalty, simply because it’s so easy for them to try new products. Brands that can cultivate a genuine community of fans are the most successful online in China, and again, brand management is key. Just as e-commerce and digital marketing can amplify your message, it can also serve to highlight your missteps, so digital tools need to be treated with respect. 

Social media is vitally important when it comes to successful online retailing in China. It is important to remember that your social media strategy will need to be redeveloped for Chinese platforms which differ from those in the West. Engaging with the consumer in their language and on their platforms is the only way to build a brand presence in China. 

Livestreaming, in particular, has become a mainstay on Chinese e-commerce platforms. According to iiMedia Research, approximately 504 million people in China watched online live streaming content in 2019, and this is expected to rise to 526 million during 2020.

Livestream sessions host real-time broadcasting of video content presented by social media Key Opinion Leaders (KOLs), who model or test products. Viewers watch a video and can purchase featured products through embedded online links.

The journey continues

While many companies will be happy to sell to China through a shopping portal indefinitely, Dianne says that for some, it will be a stepping-stone to a larger presence. “Blackmores started selling online to China,” she explains. “Then it exported container loads and put them into bonded warehouses, and then it sold directly in China from bonded warehouses. Now Blackmores manufacture all over Asia. But it’s important to realise that we are probably talking about a 15-year journey, not a one-week journey.”

Where to go for assistance

A good starting point is Austrade’s overview of the Chinese market on E-Commerce in ChinaAustrade also offers a range of services to assist companies in engaging with potential business partners in China, including through virtual meetings and digital platforms. This is particularly useful given the current restrictions on travel and the impact of COVID-19. Austrade has set up an e-commerce landing page, which captures all the e-Commerce webinar recordings, guides for online exporting, e-commerce reports for different markets.

Export Council of Australia provides practical education and training, advice and advocacy to the Australian export community. 

Export Finance Australia is the government’s export credit agency. It supports SMEs, corporates and governments to realise export opportunities or contribute to the export supply chain. 

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Clare Loewenthal
Clare is an author, business commentator and passionate contributor to Dynamic Business. She was the Founder and Publisher of Dynamic Small Business magazine, which became Australia’s largest small business publication.
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