How to Cash In on Chinese E-Commerce

on August 5 2013 | in Digital | by | with No Comments

China's e-commerce

In the United States, e-commerce accounts for 7 percent of total sales, The Wall Street Journal reports. In China, 20 to 30 percent of purchases, or as much as 50 percent among young consumers, happen online. There are big opportunities available for foreign brands who tap into Chinese e-commerce, but the Journal cautions would-be participants to avoid “the fallacy of nothing” – the idea that the successful marketing strategy at home will transplant perfectly and take root in China.

Adapting to local needs is key. In China, shopping is a more pronounced social activity than it is in the United States. Online consumers are hyperactive. They engage in discussion of their products through a tangled web of reviews, ratings, and social media feeds.

Alibaba, the Chinese online giant with more sales than Amazon and eBay combined, has a roster of more than 500 million registered customers, all of whom are empowered to share their opinions on purchases. Frank Lavin, Chairman and CEO of Export Now, explains how in China, the brand offers Chinese consumers a frequent buyer program and membership cards, while these features do not appear in the United States. “In the U.S. you are a consumer, but in China you are joining a club,” he said.

Lavin recommends that a company’s e-commerce strategy become its entrance strategy for China, leaving the brand the ability to pursue offline sales as necessary later on. “Youth-oriented brands such as Quiksilver and Uniqlo have become adept at this, launching a product or a theme on-line before pursuing it in traditional stores,” he said. He also recommends that foreign brands hire a middleman to place between the customer and the manufacturer, allowing the brand to offer merchandise in China without having a physical presence there.

Having a middleman does not mean easy entrance into the market, however. Lavin cautions brands to remember that Chinese firms tend to dominate because their lower cost structure gives them a price advantage.  There is room, however, for premium brands to make an entrance where consumers will be more concerned with prestige than price. Both Levi’s and Nike have found success in China by appealing to affluent consumers, rather than those looking for the best bargain.

A final piece of advice: use the flexibility of online commerce to experiment as much as possible. In avoiding expensive brick-and-mortar stores at first, market research becomes less important. With a smaller up-front investment at stake, brands can jump in and see what sticks.

image credit: christian rivera

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