E-Commerce in China: What to Expect

• 
• MATHEW MCDOUGALL
• CEO @ DIGITAL JUNGLE
• VISIT MATHEW’S WEBSITE
• 11TH AUGUST

Image courtesy of Shutterstock.

The Chinese e-commerce market is exploding. But there are some key differences between the East and the West for those entrepreneurs to consider while sizing up the opportunity, writes Mathew McDougall.

Of course, foreign markets all have their fair share of eccentricities to come to terms with, however this is doubly so for Western entrepreneurs considering opening up shop in China. The opportunity may be great, but it is certainly not without its challenges.

Many Western internet companies failed in trying to enter China – such as Groupon or eBay – because of a lack of knowledge about the market. The digital landscape in China is different in terms of social media, search engines as well as legal concerns. Therefore, brands cannot expect consumers to behave the same way as those in the West.

These consequences are usually not expected by brands as they attempt to break into the Chinese market. If doing business in China is different than in the West, launching an e-commerce platform in the country requires a great knowledge of the market.

Local Competitors and Local Consumers

One of the main factors to take into account when launching a company anywhere is the competition. China’s e-commerce market is dominated by Alibaba Group Holding Ltd. The company owns Taobao, China’s eBay doppelganger, Tmall, another B2C platform for sophisticated brands and finally Juhuasuan, a third platform for group buying.

China’s population has reached 1,362 billion people, and according to CNNIC‘s internet development statistics report, the internet user population went from 618 million in 2013 to 632 million of internet users at the end of June 2014, increasing by 2.3 percent. The penetration of internet users is less than half of the population, but this still represents a significant opportunity. This is why China is expected to be the largest online market by 2015, even though the average netizen (connected consumer) spends just 25 hours on the internet every week, which could be considered low compared to the Western consumers.

However, it is important to know how different these potential customers can be. As you may know, Facebook, Twitter, YouTube, Google or even Snapchat are not allowed in China. Sina Weibo and WeChat are the most popular social networks around the world but the Chinese social media landscape is far larger than that. Social media is divided into two parts that includes ‘Social Marketing Platforms’ and ‘Interest Communities for Target Segmentation’.

According to a study from WeAreSocial in 2014, 81 percent of the Chinese netizens go online via mobile. The numbers of Chinese mobile consumers grew rapidly in 2013, with Reuters citing a rise of as much as 42 percent between December and June. According to Business Consulting manager, Robert Wang, Chinese costumers would like to do their online shopping during working hours. What is interesting and different from the West is the very high adoption of live chat as part of the standard customer service experience.

On-site Technology, Design and Payment

Debit card and cash on delivery are the dominant payments for online purchases like Taobao. Other than these two payment methods, some Chinese consumers use the Alipay (Alibaba Group) app to pay for everything. And by everything, I mean taxi rides, electricity or water bills, rent and sent money to friends. Alipay is the current leader in China in term of online payment business as Paypal is not popular in the country.

Coming to compete with Alipay, WeChat mobile app has recently tied-up with a taxi app a few months ago, subsequently opening an online payment tab via the app on July 5. The mobile app has 355 millions of active users across the world, with WeChat offering the opportunity to communicate and pay via the same platform. Just like Alipay, users have the ability to book flights, taxis, transfer money (locally or internationally), pay bills, buy in-store and just about everything else with this service.

Website design is also a factor to take into account. An e-commerce platform should look the way the Chinese like. Colors and layouts should be adapted to Chinese consumers. Make a platform easy to navigate for the target will consequently make Chinese netizens stay longer and purchase better.

For example, Chinese websites have a much higher tolerance for invasive advertising such as web banners and pop-ups. Westerners may run away from a site and will feel overwhelmed by advertising, but the Chinese are completely comfortable with the practice. East Asian websites will more likely use bright, primary colours to catch the eye. While Westerners may appreciate clean and understated content, a Chinese consumer’s preferences will tend toward being near-painfully bold.

More important than the price factor when making a purchasing decision, is the brand reputation. Thus, when developing an ecommerce strategy keep in mind that a Chinese consumer is more inclined to purchase from a brand if they have heard about it before through advertising either a campaign or from their friends, family or fellow netizens.

As you might expect, when doing e-commerce in China there is an incredible number of potential consumers, owing to the staggering number of internet and smartphone users. On the other hand, what you might not expect when doing e-commerce in China is the complexity of factors that are fundamentally different from the West.

In addition, the behavior of online consumers differs between China and the West. Chinese consumers expect a different kind of content and are use to receiving information in a certain way. Chinese consumers are very comfortable purchasing goods online, either through apps or websites. Knowing how successful the e-commerce market is in China means this might be the perfect time for your brand to expand in to the Chinese market.