Getting started selling online in China
China is an enormous opportunity for New Zealand companies to sell goods and services online. Chinese consumers spent NZ$12.9 trillion through mobile payment platforms in 2016, about 50 times more than their American counterparts, according to iResearch.
China is the world’s largest e-commerce market, and with only 45 percent of consumers saying they have purchased online in the past month and an average annual e-commerce spend just 43 percent of that in the UK (at January 2018, 2018 Global Digital Report), there is plenty of room for continuing growth. However, the Chinese e-commerce ecosystem and online environment is vastly different to that in the West. What might have been a successful e-commerce strategy for your New Zealand brand selling into Europe or North America will need to look very different to succeed in China.
Remember to get professional advice for your specific business, and bear in mind that you may need to take different approaches over time as your sales volumes grow.
Key online e-commerce channels in China
Daigou e-commerce channel. A network of professional shoppers buying goods in New Zealand, and mainland Chinese buyers where almost all purchases are mediated by social media or Chinese e-commerce platforms. Daigou often establish their own personal stores on e-commerce platforms such as Taobao.
Your own e-commerce site. You can sell goods from your own site, allowing you to retain control over the point of sale. Your site must be locally relevant, and supported by local social campaigns to drive traffic to it. You must comply with all regulations and laws regarding importation of products into China. If your site is not hosted in China with a .cn domain name you may be impacted by slow access speeds.
Cross-border e-commerce (CBEC) via a global e-commerce platform. If you don’t have a local Chinese business entity, CBEC may be right for you. Several large Chinese e-commerce platforms have 'global' sites, such as TMall Global and JD Worldwide, which allow foreign brands to sell direct to Chinese customers. These sites are usually invitation-only and have high running costs, but great interfaces which are simple to use.
A local e-commerce platform. If you have a registered Chinese business entity, or have the right local partner to register the store and secure local solutions for customer service, delivery and returns, you could sell on a local e-commerce platform such as Taobao, Tmall or JD.com. These platforms give access to many millions of end users and have typically lower set up costs than global e-commerce platforms. They do, however, require goods to be brought in-market, making a warehousing and fulfilment option necessary.
The e-commerce ecosystem is complex
Two tech giants, namely Tencent and Alibaba, rule the roost. The complex online shopping market in China is dominated by brands like Taobao and Tmall, both owned by Alibaba, and Tencent’s JD.com and JD Worldwide, with Amazon China lagging behind at only 1.3 percent of the market in 2016. Although Amazon is a familiar place to start for many Kiwi companies selling online in other markets, it is unlikely to be the right fit for your China strategy.
In China, e-commerce marketplaces are rapidly converging with social chat platforms, creating social commerce or s-commerce. In this emerging space, China leads the world. Why? China’s annual growth in social media users is double digit, way outstripping the West. The cashless society is becoming a reality in Tier 1 and 2 cities in China, and according to iResearch, at the end of 2016 Tencent reported average payment transactions exceeding 600 million transactions per day. One stand out example of the success of s-commerce is Pinduoduo (a 'group buy' s-commerce app) which is reported to be the third most popular e-commerce platform in China. The growth trajectory of s-commerce meant Pinduoduo achieved in just 2.5 years the same revenue it took e-commerce leader JD.com 10 years to reach.
Chinese consumers use their social platforms, e-commerce, s-commerce, channel partner and brand websites to find, research, compare price and buy your products. This means your China digital marketing strategy may be more complex than for other markets.
The regulatory environment is changing fast
Chinese authorities have implemented several measures in the last two years since 2016 to combat ‘tax avoidance’ and tighten the inspection of imported goods that enter China by non-traditional channels. One example is the ‘whitelist’ of over 1,000 commodity items which can be legally imported into China through cross-border e-commerce, and reduction in import duties on some consumer goods as of 1 December 2017. Rule changes are expected to continue at pace.
These regulatory changes, and potential shifts in consumer trust, mean that if you’re planning to sell into China through any e-commerce model, keep a close eye on regulations and make sure you have a strategy that can cope with possible change in the future.
Before you get started in China
- Consider registering ".cn" domain names to secure your brand, company name or trademarks and protect yourself from scams. The China Internet Network Information Centre (CNNIC) is the official Chinese government body with this responsibility, and they have accredited overseas registrars for foreign applicants. Registration is on a 'first to file' system.
- Consider registering your brand name or trademark to secure yourself from scams. Registration is administered by the Trademark Office of China (CTMO) (in Chinese only) and is a 'first to file' system. Applications from non-Chinese nationals must be made through an accredited agent.
- Research to find out if your product is making its way to China through daigou channel, and how it is being positioned through which platforms.
- Map out your top-down pricing models end-to-end. It's important to understand how your online pricing varies from your bricks and mortar, daigou or distributor pricing if you have it, where margin goes at each step and all the different routes by which your product can make its way onto an online platform.
- Invest in a local language website – even if it is not a .cn domain, local language means Chinese consumers can seek more information on your company and your brands.
- Secure and activate your Chinese social media handles.
- Check out your competitors' online pricing, and see how much it varies. Sixty percent of online consumers say price is the first factor they look at when making a decision.
- Plan your marketing calendar. All cross-border activities require three to six months' preparation. Registration for one of China’s most popular online sales days, Singles Day (11/11) starts six months before the event in May each year. It might be worth the planning: in 2017, Chinese shoppers spent US$25bn on Singles Day.
Amazon’s B2C marketplace has a modest share of the booming China e-commerce market. While it may seem a familiar place to start for Kiwi exporters, make sure to do your research on what it really takes to get your products to market here.
This B2B2C cross-border e-commerce (CBEC) hypermarket enjoys 26% of China’s CBEC market. Buying directly from suppliers at a discount, Kaola has 27 million active customers. Read more about what to consider when selling to Kaola from New Zealand.