You don’t have to have an MBA from Wharton to spot the opportunities the Chinese market presents for ecommerce.
The world’s most populous nation, the People’s Republic of China, has the world’s second-largest economy, with a GDP of nearly $16 trillion. And what’s truly astonishing is that most of its economic growth has occurred over the last three decades.
If you’re like most foreign (i.e., not based in the PRC) companies, this potential probably has you licking your chops.
But unfortunately, this is a notoriously difficult market to enter for Western companies because it presents several unique challenges. These often include:
- Difficulty navigating a complex and inconsistent bureaucracy.
- A poor understanding of consumer buying habits.
- Governmental challenges include corruption and a lack of transparency.
- Sourcing local labor and managing employees.
- Intense competition (and rules that favor domestic companies).
That said, it’s not impossible, and the possibilities far outweigh the cost and time required.
In this piece, we’ll discuss the unique challenges of doing business and look at nine things ecommerce companies can do to not only get their foot in the door but also thrive.
Ecommerce Tips For Marketing In China
1. Understand Chinese Consumer Behavior
Chinese digital shoppers do not behave in the same manner as their American and European counterparts.
For one thing, thanks in no small part to censorship laws, Western search engines have no significant presence in the PRC.
Instead, the Chinese have several home-grown search engines, each with its niche in the market.
And the vast majority of shoppers are using these on mobile devices, with 99.7% of Chinese internet users accessing the web via smartphone.
But, those are far from the only differences in consumer behavior.
Chinese citizens also prefer single-entry-point shopping, where they can choose between brands rather than visiting a shopping platform of a single company.
For example, they’re more likely to buy Nikes from Tmall (an Amazon-like store) than from the Nike site itself.
Chinese consumers are also heavily swayed by influencers and social media.
Chinese companies actively encourage celebrities to use their apps as a channel for product launches. And direct links from social media posts to online stores make it easy for shoppers to find and buy the exact shoes their favorite star was wearing.
Additionally, the vast economic growth the country has undergone led to an increased emphasis on quality, convenience, and customer service when making decisions.
2. Select The Right Products
Whereas previous Chinese generations may have valued collectivization and sought benefits for society, modern Chinese consumers have moved into a more individual mindset.
In a whitepaper entitled “Chinese Consumer Insights 2022,” Ireland-based professional services company Accenture found an 11% increase in consumers willing to buy products that highlight their identity between 2013 and 2021.
This should come as no surprise in a country that now boasts more than 700 million middle-class citizens.
To ensure the success of your ecommerce marketing in the PRC, you need to sell the type of products they’re looking for.
Goods for leisure activities, technology, beauty and makeup, and clothing remain hot items on the Chinese digital market.
There is a high demand for foreign products, but they must be considered premium alternatives to domestic items.
According to the South China Morning Post, an English-language newspaper owned by Alibaba, China claimed 32% of the global luxury goods market in 2020.
This is a huge opportunity for foreign companies looking to expand into the Chinese marketplace.
3. Set Up Local Hosting For Your Website
Chinese search engines tend to prioritize websites hosted on servers within the country. Launching a Mandarin version of your existing online store alone will not cut it.
To show up in the searches of Chinese consumers, you need a site hosted in China. But it’s not as simple as clicking a few buttons and filling in your credit card information.
Before any website can be hosted in the PRC, you must apply for an Internet Content Provider (ICP) registration with the Chinese Ministry of Industry and Information Technology (MIIT).
Depending on which industry you fall under (e.g., education, healthcare, financial services), you may have to receive permission from a relevant government agency before applying.
You need to receive your ICP commercial license, as well as an Electronic Data Interchange (EDI) if you plan on processing data and transactions.
However, if you plan on having a physical presence in China, you may not need an ICP.
Just be aware if you do need one, the entire process may take several months.
4. Use Trusted Payment Processors
The way payment works in China differs from what you’re probably used to.
For one thing, the model varies depending on the type of transaction. You could try to navigate these complex requirements on your own, but it’s recommended that you work with a third-party online payment platform like Alipay or Tenpay.
Alibaba’s Alipay is the primary payment method for major Chinese ecommerce platforms, TMall and Taobao. It offers escrow capabilities to reduce risk when receiving payments.
You’ll need a Chinese phone number, bank account, and a Chinese business license to use it.
Tencent’s Tenpay also offers escrow and is simpler to set up.
To receive your license, you must prove to Tencent you want to do business in China and provide a foreign ecommerce website.
This requires a China-visible WeChat account, a cross-border payment account, and a WeChat ecommerce website.
Note: You can apply for your WeChat account and foreign business license directly through Tencent, though this is not a standard process.
Minimize your payment risk with product inspection certificates that attest your items meet agreed-upon quality requirements.
5. Provide Exceptional Customer Service
Chinese business is built upon a concept known as guanxi. Roughly translated, this means personal relationships with an implied level of trust and mutual obligation.
Because this has historically been such an important aspect of how business is done, Chinese consumers have an ingrained expectation of hierarchy, negotiation, and customer service.
While the first two are not so important to ecommerce companies, the third is crucial.
Competition in the digital marketplace is fierce, meaning Chinese shoppers are used to superior customer service.
They expect – and you should provide – things like fast delivery and returns, clear communications in Mandarin, and easy mobile payment options.
And they’re not afraid to share their opinions on social media sites, so bad customer experiences can have far-reaching effects.
6. Choose The Right Logistics Solution
Late deliveries, damaged items, and difficult return policies will turn Chinese customers off. That means your logistics must be iron-clad.
Unfortunately, finding high-quality providers can be difficult in mainland China.
This leaves you with three options: Build your own, partner with or acquire existing firms, or find a good third-party provider.
The first two options are time-consuming and prohibitively expensive for most ecommerce companies, so that leaves only option number three.
Logistics providers in the PRC generally fall into two categories:
- Companies compete based on their large network.
- Companies that compete based on superior service.
Choosing which is right for you will depend on what you’re selling.
For example, if you’re selling pet rocks throughout China, size is more important than service.
Your product is unlikely to be damaged, and your primary goal is getting it into the hands of the buyer, wherever they’re located.
On the other hand, if you’re selling crystal birdhouses in the Shanghai metropolitan area, a smaller logistics company that can provide a higher level of care and service is probably preferable.
7. Reach More Shoppers By Using The Top Marketplaces
As was mentioned in the first tip, Chinese online shoppers prefer marketplaces to brand websites.
While you can sell through your site, you’ll be exposed to a much larger audience if you’re part of one of China’s big online marketplaces, like Taobao, Tmall, or JD.
In 2019, Taobao surpassed $490 billion in gross merchandise volume. Tmall was second at $463.5 billion, and Jingding claimed third at $301 billion.
As you can see, the sheer volume of sales these sites account for is incredible. Taobao and Tmall are both owned by Alibaba. Jingding, or JD, is supported by Tencent.
Selling on these platforms usually requires your company to be registered in mainland China, though there are exceptions in some product categories.
These platforms are not interchangeable. Tmall is generally viewed as the luxury version of Taobao, and consumers trust it to find authentic branded items from abroad.
JD offers a wide variety of goods, from frozen foods to electronic books.
8. Take Advantage Of Shopping Festivals
Like Western online retailers have Cyber Monday and the run-up to Christmas, Green Monday, and Amazon Prime Day, China has its major shopping festivals.
To maximize your sales, you should be aware of these and use them to your advantage. These include:
- Pre-New Year’s (January-February) – Just like the days before Christmas see massive shopping numbers in the West, the months before the Nian Huo Festival or Chinese New Year are busy shopping times for ecommerce retailers.
- International Women’s Day (March 8) – Called the “Queen Festival” by Alibaba and the “Butterfly Festival” by JD, this day and the day before (Girls’ Day, March 7) are big online shopping days as men give presents to their significant others.
- Mother’s Day (Second Sunday in May) – Filial piety is a big part of Chinese culture, so it’s no surprise that Mother’s Day is a big deal, with a corresponding increase in gift purchasing.
- Love Day (May 20) – An unofficial Valentine’s Day, Love Day falls on this day because “five two zero” is a homonym for “I love you” in Mandarin. Valentine’s Day is also celebrated on its traditional date.
- Midyear Shopping Festival (mid-June) – China’s answer to Prime Day, this summer event was started by JD but adopted by other online retailers.
- Golden Week (starting October 1) – Beginning with China’s National Day, this week-long holiday sees a massive influx in spending because of traditions involving travel, family reunions, and gift-giving.
- Singles Day (November 11) – First celebrated in 1993, 11/11 has become a big online shopping day in which people celebrate being single. A month later is Singles Sequel, on December 12 (12/12), many online retailers run inventory clearance events.
9. Promote On Chinese Social Networks
Chinese citizens love their social media platforms like the rest of the world.
And while none of these have direct correlations with more familiar platforms like Facebook or Instagram, many share similar features – including paid advertising.
In tip #1, we mentioned these sites’ role in online sales.
The ability to click on an item in a Chinese social post and be linked directly to that item in an online store allows influencers to wield massive influence over purchasing decisions, which is a good reason to foray into this market.
Additionally, just like Westerners, the Chinese spend a good portion of their daily lives on these sites, which means well-placed products will generate a lot of exposure.
Here are some of the most popular social media sites in the PRC:
- WeChat – Sometimes referred to as the Chinese Facebook, WeChat is more accurately a combination of Facebook, WhatsApp, Google News, and a dating app combined. It has 1.2 billion monthly active users worldwide. An all-in-one messaging app from Tencent, it also has games, shopping, and financial services.
- Sina Weibo – 252 million people use this micro-blogging app every month. It is most similar to Twitter in that it has character limits while allowing the posting of videos, images, and gifs.
- Tencent Video – The fourth largest streaming service worldwide, Tencent Video has 1.2 billion monthly active users. China’s online video market is highly competitive, but Tencent Video is the leader, outpacing rivals IQiYi and Youku.
- Xiao Hung Shu – A hybrid ecommerce/social media site, this platform allows users to post reviews, participate in discussions, and post content. Most content is focused on product photos and shopping experiences. It has 100 million active users each month.
- Douban – With 200 million monthly active users, Douban is a social networking platform dedicated to lifestyle content. The platform has integrated functionality allowing users to download ebooks, listen to music, and buy tickets for movies and concerts.
Chinese Ecommerce Is Worth The Work
As you can see, getting into the Chinese digital market requires a fair bit of work. But because online shopping is a huge piece of the Chinese economy, it’s worth the effort.
Be aware that you will probably face legal, cultural, and digital hurdles. And the process of getting set up will take much longer than you’re accustomed to.
With that said, if you have the time, patience, and language skills to navigate the complicated bureaucracy and develop a strategy that may feel alien initially, you’ll be gaining a foothold in one of the world’s biggest online markets.
Chinese citizens are strongly interested in international brands, particularly those perceived as high-end. But if you’re not a luxury goods company, don’t let this dissuade you.
The Chinese online marketplace provides a tremendous opportunity for businesses of all types and sizes.
Do your homework, follow the proper channels, and you’ll become a successful ecommerce player in China.
Featured Image: William Potter/Shutterstock