Imagine that you want to buy a specific product online. Where do you search for it? A large section of you will surely visit the larger online marketplaces like Amazon and Ebay. Or you will go straight to the online shops of the brand manufacturers.
If you search in China, however, the online shopper there will view you with amazement. Just like you would view them when they tell you how eCommerce works in the Middle Kingdom.
China has experienced a rapid economic boom over the last forty years. With cumulative online sales of $672 billion annually, this eCommerce giant stands ahead of the US ($349 billion) in the top worldwide ranking.
We show you how online retail in China ticks in comparison to Germany and how you as an online retailer can succeed in entering the Chinese market.
Why online retail in China is booming
In 2017, eCommerce sales in China stand at around 423.5 million euros. But still not enough, however, as forecasts predict an annual growth in sales of 15.6 percent over the next few years. As a result, the nation will replace the US as the world’s largest retail market by 2018.
How will this happen?
China accounts for the largest share of Internet users worldwide. At 591 million, almost half of the Chinese population is buying online – and that trend is on the rise.
This high proportion has allowed the costs for WLAN and fast mobile Internet, as well as mobile devices such as tablets and smartphones, to be reduced over the years. China’s online businesses have also solved the hitherto problem of its huge, undeveloped hinterland. The linking of conurbations and the backcountry has allowed for faster expansion.
Different countries, different customs: How the Chinese market ticks
The eCommerce giant Alibaba has been decisively involved in the Chinese success. Founded only at the turn of this century, the group is now one of the ten most valuable and successful companies in the world. In China, Alibaba is already the largest online player in the country and reaches up to 95 percent of the Chinese population. To give you an idea, this is roughly the same as the entire US population.
On the other hand, you will find fewer individual online shops in China. The online purchases of Chinese customers take place via Alibaba’s online platforms, such as “Tmall” or “Taobao” – the equivalents to Amazon and Ebay. These big players, however, are less well-known in China. The Alibaba Group is therefore highly familiar to Chinese online shoppers.
High quality requirements are why China gladly buys online
Chinese people like to buy on domestic online marketplaces, but they by no means prefer domestic products. This represents a great opportunity for online retailers from the West, since international brands enjoy an excellent reputation in China.
Because of abundant product counterfeits, the consumers there particularly prefer German brands, which promise them quality and safety. For this reason, premium brands in China make major sales.
But luxury goods also have great appeal. These are significantly more price-intensive in their own country due to high duties and taxes. From abroad, however, Chinese consumer products such as handbags, cosmetics and spirits can be bought much more cheaply.
China as a pioneer in mobile commerce
Even when China is regarded as a technology-based country, by no means every inhabitant owns a computer. Shopping online is much more popular using mobile devices. For this reason, the Alibaba Group is not only limited to online platforms, but is constantly developing additional systems for online purchase. Their own Alipay online payment system, as well as messenger services or online social networks, are used extensively.
The preferred mobile commerce clearly shows which generation is behind this growing retail. In China, the younger target group (19-35 years) makes up the most lucrative of online shoppers at 60 percent. Not only are they more brand-oriented, but they are also especially more active in the social media sector. There they can find from customised apps products which are perfectly tailored to them.
How to start your online shop in China successfully
Many companies are already convinced that the Chinese market offers great potential. Nevertheless, you should not rush your market entry, but instead follow a clear China strategy. Attention should be paid to certain points here.
First and foremost, you will encounter linguistic and cultural obstacles. Just because your online strategy works in Europe, it does not have to be compulsive in China. Chinese customers tick differently to Germans. They love informative websites with colourful pictures, which can also be very imaginative. At the same time, Chinese shoppers prefer security and want detailed product information before purchasing.
Especially on online marketplaces like Tmall and Jingdong, you will encounter numerous competitors. Invest in your brand awareness and win the trust of customers for your shop.
Ask the following questions of Chinese market entry:
- Which of your products and brands are already offered in the respective country?
- Who is my competition and what is the product range of my competitors?
- How high is the demand for the products you want to offer in the new market?
- Are there any legal barriers to entering the foreign market?
- What do the products costs abroad and is there any room at all for margin?
You can also use active price management in international eCommerce
To be successful in international eCommerce, your online shop must have a clear competitive advantage over other foreign shops and also over domestic ones.
Apart from major competition, Chinese online marketplaces offer you few differentiation options.
To stand out, you need to display your advantages. This is achieved through exclusive products and high-quality brands, which are not available in China. Ultimately, however, it still holds that an attractive price is a decisive differentiating feature.
First of all, perform a competitor and market analysis. Determine who your competition and how their product range is positioned.
Then follow the price development of those products. Monitor the prices of your competitors and adjust your pricing strategy accordingly.
For quick and comprehensive price monitoring, we recommend our blackbee Business Intelligence Suite. Especially in a complex and often unclear international eCommerce you will need intelligent software solutions. blackbee collects all price and product information from the required online shops and marketplaces, thus providing you with a market overview.
blackbee is usable language-independently and offers you the possibility of optimising prices across all countries and sectors.
Would you like to expand and are interested in the topics of market analysis, product range analysis and price management on the Internet? Contact us now – we look forward to your message.