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Facts About Online Business in China

Are you looking to make money through Ecommerce in China? In this article we will focus on some of the key aspects of the largest online market in the world.

China ended last year with 618 million Internet users of which 60% have said to be online shoppers, according to a report published by state-affiliated research organization China Internet Network Information Center (CNNIC). Although China’s retail market is relatively young, it’s annual revenue is expected to overtake the US by 2015.   This may very well give foreign marketers a great advantage when trying to build brands in China without having to worry about opening flagship stores across hundreds of cities. Now, before your eyes start flashing golden dollar signs, let’s take a look at some of the factors that make the Chinese Ecommerce market so unique and why it might be a challenging point of entry for foreign companies.

The first thing to understand before getting started in the Chinese online market is what drives Chinese consumers to shop online. In the West, shopping online is mostly all about convenience. It is just great to order that cool new camera on Amazon and come home from work the next day to find it sitting right there on your doorstep. In China, however, one of the main reasons why consumers shop online is availability. China is a country of continental dimensions and some luxury products, for example, are hard to come around in second- and third-tier cities.

Another main factor that drives the Chinese online market is price. Chinese people love to bargain and they are extremely proud of their bargaining skills. In fact, they are willing to go great lengths to make sure they get the best bargain. Through online shops, they are easily able to compare prices across the country within a couple of hours and be able to sleep at night knowing that they have done  a good  the best deal. Now that we know what drives the Chinese online market, let’s take a closer look at how hard it is to actually win a Chinese customer.

Previous research done in Europe has shown that the average European consumer takes about 3o days between the time they first come in contact with a brand up to the point when they are actually ready to buy. During this time , they may make up to 11 searches online connected to the purchase and go through about 40 interactions with online ads and social media posts. In China, due to the price sensitivity mentioned above, these numbers tend to be 2 to 3 times greater. This suggests that the Chinese consumer is indeed much more demanding than the average Western consumer.

Display of large amounts of content plays an important roll when trying to convince a Chinese consumer to make a purchase. In the West, websites tend to be all about design and information circles around it. In China, information is at the center point and design is practically non-existent. Chinese website deliver on average 40% more information than Western sites. One great example of this is the website sofun, but I must warn you: stay away from it if you suffer from epileptic seizures.

When it comes to spending money; what are the Chinese buying? This is  a decisive question to ask when trying to establish an online brand in China. In the West, people tend to shop online mostly for things like electronics, but in China apparel is what dominates the ranking. Other products like baby accessories and toys also do very well. In the West, these things would account for a little over 4% of sales, but in China, they may be as high as 20%.

We have looked at some of the core characteristics of the Chinese Online market, but there is still one main issue that might well account for any company’s main obstacle to tackle when entering the Chinese scenario. As we all know, China is plagued by counterfeit goods and cheap knock offs. It is not at all uncommon for people to get scammed when doing business online. This is something so common that most Chinese consumers avoid buying from standalone websites and prefer to buy on safer C2C platforms like TaoBao.

Alibaba’s TaoBao (Treasure Hunt in Chinese) is China’s largest consumer-to-consumer marketplace and one of the top 10 sites in the world according to Alexia Rank. It’s big brother T-Mall is the group’s business-to-consumer version of TaoBao and also enjoys great popularity throughout the country. These sites have implemented a paying system called AliPay, which ensure that consumers get what they are paying for. This simple “safety mechanism” helped pave Alibaba’s way to success and has turned their platforms into the de facto online commerce platforms of China.

We have seen that Chinese consumers are driven by price and information. We have also learned that they tend to be a harder crowd to seduce, partially due to the common scam cases in online transactions. So, is it really possible to establish an online business in China away from large platforms like T-Mall?

This a good question, which requires a complex answer. The truth is that as a marketer, your largest challenge will be to establish a relationship of trust between your brand and your target Chinese consumers. The best way to go about doing this, might actually be to start out with a T-Mall store and eventually create ties with returning consumers. You might want to connect with your clients on a more social and friendly level via Weibo or Wechat. Maybe sending them occasional messages to establish the idea that you have a solid business behind your brand. Parallel to this, you may very well build your own online presence away from the sales platforms in order to showcase your products and brand.

I hope this article was helpful as a small introduction to the Chinese online market. This topic is by no means saturated and will most likely appear again on this site. Until then, I wish you all good luck.