6 Ways Retailers Can Capitalize in the Chinese Market

Joining one or several of these platforms is generally a lower-cost way to sell in China, allowing retailers to get a feel for the market and test strategies. As the market leader, "Tmall appears to be the best way to attract traffic," says Walters. The downside: The marketplace's popularity means "it can be hard to generate a consumer experience that's distinct from that offered by competitors also selling on the site."

Like brick-and mortar shopping malls, B-to-C marketplaces offer a presence in a high-traffic neighborhood, but retailers pay for this positioning and they still must handle the dirty work of marketing, managing their store, providing customer service, fulfillment and delivery logistics. Third-party service providers can be hired to tackle many of these functions.

2. The "outsource everything" option. In the past, the expense and complications of Chinese e-commerce made it impractical for small and midsized retailers and manufacturers to sell directly to Chinese consumers. But recently new companies have emerged offering soup-to-nuts China solutions aimed at and priced for U.S. SMBs. Export Now and GTC Commerce provide Chinese-language online storefronts, operate their own warehouses in China, and promise to handle all overseas shipping, customs issues, last-mile delivery, even Chinese-language customer service. The services, which get paid by taking a cut of every sale, are just getting started so the jury's still out on their effectiveness.

3. Adapt to local tastes. Online shoppers in China are increasingly discriminating and intolerant of fakes and shoddy goods. Their tastes today "aren't drastically different from U.S. consumers," says Janet Wang, head of international business development for Tmall.com. Still, e-tailers should take advantage of the data and consumer feedback available through e-commerce to monitor and adjust to local demand. "We recommend that brands be sensitive to any market changes and be flexible," says Wang, "sometimes even customizing particular products, colors or styles for the Chinese audience. For example, Ray-Ban launched a collection of sunglasses designed to better fit Asian face shapes."

4. Encourage customer feedback. China's digital marketing landscape, devoid of Facebook and Twitter, can seem alien, but companies can get their messages out by tapping multiple channels, including the country's indigenous social media. Walters says one striking difference in China is the time and energy online shoppers invest in writing and reading product reviews. A BCG survey found Chinese consumers depended on product reviews when shopping online more than any other group in the world. "Knowing how to be part of that online conversation is really important," Walters says. Product reviews "can't be ignored in this market."

5. Hold the line on pricing. Chinese consumers have less disposable income than shoppers in the developed world, but that doesn't mean more expensive products from the West can't get a foothold. "Usually China is the low-cost producer, so you're not going to compete on price," says Frank Lavin, a former U.S. Commerce Department undersecretary and chairman of Export Now. American-made goods are perceived by Chinese consumers as premium products, he says, an image that retailers should foster rather than erode by cutting prices.

"The most important asset you have is your brand," Lavin says, "and you should not dilute that by going down-market. It might mean you have a little less depth and penetration in the market but you maintain your brand integrity and definition."

6. Protect your intellectual property. Piracy remains a big problem in China. If your product becomes even marginally popular, there's a chance your brand will be copied or imitated. To defend yourself, you may need to commit staff to monitoring your intellectual property on the Chinese web and hire a lawyer to threaten transgressors. Holding valid U.S. patents and trademarks isn't enough. To bring a lawsuit in China's patent courts, you'll first have to register your intellectual property in China.

Despite the obstacles, the risk-reward balance in Chinese e-commerce is tipping toward reward. "China is changing so rapidly that even people who visited five years ago don't have an accurate view of consumer power there," says Lavin. "They tend to think the degree of difficulty is high and purchasing power is low. But the degree of difficulty is dropping every day and the benefit of accessing this market keeps growing every day."

Jim Erickson is the managing editor of Alizila, the corporate news website for Alibaba Group, one of the world's leading e-commerce companies.