The Wild, Wild East

By Karen Jackson

4 Tips to Help Your Brand Sell in China

Eager to take your e-commerce business international, particularly into China? Here are four tips to help you get started:

1. Research the shopping habits, culture, history and political environment of China. Be quick to spot pitfalls and avoid them. Getting a better understanding of the Chinese people and culture is the fundamental thing to do. Take a look at Groupon’s efforts in China if you’re curious about what not to do when entering the country.

2. Understand the Chinese, but don’t act as if you’re Chinese. Remember that you’re an American or Australian or French business and you represent the values of your country. Don’t go too far down the road of localization. Your nationality is what fundamentally differentiates you from local competitors. Chinese consumers want to buy your products — often at a higher price — because they want the safety, quality, technology, fashion or whatever other characteristics and features you can offer.

3. Many retailers go into China thinking, “The country has 1.3 billion people; if only 0.1 percent of them buy my product by sheer chance, we’ll be rich beyond our wildest dreams.” It doesn’t happen like that. Chinese consumers, due to their cultural upbringing, move in flocks. They like to do everything together. Chinese consumers usually follow the mainstream. Therefore, you have no such chance of taking a 0.1 percent market share. If your product doesn’t appeal to 30 percent of your target demographic, you’re dead in the water. Try figuring out 10 reasons why a Chinese consumer in your target demographic would want to buy your products. If you easily come up with 10 answers, well, it’s time to get on a plane to Beijing.

4. Ensure that you have an adequate budget in place for the launch of your business. Don’t expect to fund growth from cash flow right away. You won’t be alone, as the Chinese marketplace is constantly in heated competition. In retail, you really need to go big or go home. — Karen Jackson

China’s economy has been booming as of late. It’s proven prosperous for a once virtually nonexistent majority of the Chinese population — its middle class. China’s middle class is growing in number, acquiring wealth and improving its standard of living at unprecedented rates. Looking out over the next decade or two, the Chinese middle class is expected to wield enormous spending power as it reaches 600 million people to 800 million people — with more than $2.7 trillion in disposable income.

As more households in China see an increase in disposable income, the purchase of luxury goods, food, apparel, household and personal products, among other expendable products and services will rise accordingly. Consumer buying behavior and unique cultural characteristics position China as a worthwhile investment for U.S. companies looking to expand their international offerings.

It’s reality that demand for foreign products in the Asia-Pacific region already exists. Many Chinese consumers hold foreign products in high esteem, believing they’re of premium quality. Conversely, the contemporary middle class tends to have distaste for local brands and domestically made products, which it views as less fashionable, less reliable and less technically advanced. As a result, branded goods from the United States and Europe have become very popular and well-regarded household staples.

Demand for luxury goods is on the rise as Chinese consumers increasingly value wealth and affluence. Purchases including jewelry, perfumes, electronics, watches, accessories, sports equipment, and wider lifestyle and recreational products will coincide with a rise of designer and lifestyle fashion in China. It’s forecasted that by 2015 the Asian nation will account for 20 percent of the world’s rapidly growing luxury market.

What to Consider Before Launching an E-Commerce Site in China
China’s large population is dispersed throughout the country, with the vast majority of citizens residing in nonurban areas. Most consumers lack access to the brick-and-mortar retail outlets located in the large urban areas. Mobile and internet penetration continues to grow in China — more than 15 percent per year — presenting a rich opportunity for e-commerce in the market because it fills the gap efficiently and affordably through low-cost delivery couriers. In fact, B-to-C e-commerce sales in China are expected to rise to $223.6 billion by 2015, a growth rate of more than 3,140 percent from 2010.

Although these low-cost couriers make online shopping accessible and cost effective, delivery times can be unreliable and erratic. A traditional delivery model might not scale since a large percentage of China’s population lives outside of urban areas. The country’s more rural areas lack the logistics and supply chains necessary to make products available locally. True e-commerce success in China will require efficient means to house and deliver products across the country.

Another limitation to consider is China’s heavy reliance on cash as the widely accepted form of payment. China is relatively underdeveloped when it comes to e-commerce transaction security and credit card use. Cash on delivery remains one of the most popular online payment types and is frequently the first option listed by leading online retailers in the country. Commerce sites that require credit cards typically charge fees ranging from 5 percent to 10 percent. The most prominent Chinese e-commerce sites use an online payment system that holds consumer payments until the customer receives the product and is satisfied with their purchase.

It’s also extremely important to be well-versed in the inner workings of the Chinese government to establish lasting, meaningful relationships with government bodies and officials. Establishing operations in China isn’t quite like setting up shop in the U.S. The Chinese government exerts far more control over the marketplace and many decisions and approvals are needed along the way. It’s better to get on its good side right away.

As China’s economy continues to develop, many of these considerations will likely become less of an issue for U.S. brands selling online in the country. To develop and launch a successful Chinese e-commerce site you must fully understand the local culture and marketplace without trying too hard to conform the brand to make it more Chinese. Keep in mind that the Chinese society values foreign products, therefore it’s crucial to maintain the integrity of your brand’s origin.

Despite the occasional pitfalls and limitations, the Chinese market presents enormous opportunity for U.S. brands. The Chinese economy continues to experience substantial growth. But before launching an e-commerce site in China, do your homework to understand the marketplace and ensure you have an adequate budget to make a big impact the first time around.

Karen Jackson is vice president at multichannel commerce and digital marketing firm Acquity Group. Karen can be reached at karen.jackson@acquitygroup.com.

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International E-Commerce: The Wild, Wild East