Blog Post - Salmon, Jan 31 2014

It’s time for brands to establish their own ecommerce sites in China

It’s time for brands to establish their own ecommerce sites in China

As China celebrate the new year, we look at the opportunity for global brands to launch their own B2C ecommerce sites in China. Happy New Year !

There’s a Chinese proverb that says, “I hear and I forget; I see and I remember; I do and I understand.” It’s a useful reminder for brands that are reviewing the burgeoning Chinese ecommerce market and considering their next move. There’s been much conjecture about both the pitfalls and merits of ecommerce in China. Brands have been able to dip their toes in the marketplace from afar, assessing ecommerce viability via established commerce platforms and online marketplaces such as Taobao, Pai Pai and Tmall. Yet to truly understand the Chinese consumer and the digital economy it’s time for brands to go further. As the proverb suggests, it’s imperative that brands “do” business in China to genuinely “understand” ecommerce in China. As such, it is time that leading brands launch their own B2C ecommerce sites.

Brands in China are still witnessing an ecommerce marketplace in its infancy. But the infant is big and growing fast. China ended 2012 with 242 million online shoppers, a year-on-year increase of almost 25 percent, according to China Internet Network Information Center (CNNIC), a government source. In other words, China’s ecommerce audience is larger than the population of almost every other country, but it’s less than one-fifth of China’s population of over 1.3 billion.

These are enticing numbers. However, it’s important to understand that this isn’t simply a gold rush where every brand will be successful due to a huge population and hockey stick shaped ecommerce adoption rates. A backdrop of complex cultural, political and geographic factors requires understanding. Brands can’t hope to expand (or enter) the Chinese e-commerce market without giving serious consideration to their strategy, technical infrastructure and the means by which they aim to execute effectively locally.

Beyond the hype and statistics that surround ecommerce in China, how should brands begin to exploit the ecommerce opportunity in China? Here are my tips aimed for brands looking to successfully deliver their own direct ecommerce presence in China.

1. Be aware that existing ecommerce “rules” most likely won’t apply.

Getting the right products to the right customers at the right time and for the right price is not peculiar to ecommerce in China. But ecommerce is different in China. Around 50 percent of the country’s population lives in rural areas. It will take many years and several transitions for the economy to become consumer-led and for the income gap between rich and poor to shrink significantly. Because the ecommerce landscape is changing so rapidly in China, be super analytical in your ecommerce operations straight away. Start gathering and acting on consumer data immediately.

2. Build trust.

Against a backdrop of fake products, fake stores and replica labels there is widespread mistrust and a fear of counterfeiting and fraud. This is in contrast to a general appetite and appreciation for prestige brands. Therefore, develop a channel strategy that embraces China’s existing and popular commerce platforms, even as you develop your own direct presence. Use every conceivable means and sales channel to build trust for your brand with potential buyers.

3. Deliver first-class service.

Chinese mainland middle-class consumers are concerned with product and service quality rather than prices, according to a survey conducted by the Hong Kong Trade Development Council. Implement interactive live help functions and integrate contact center tools with your ecommerce platform and operations from day one. Be certain to ensure that your customer services span browse, payment, shipping and post-sales support.

4. Organize marketing, sales and logistics to reach the full market.

It’s estimated that 75 percent of China’s affluent middle class lives in so-called lower tier, smaller cities. These are places that most people outside of China haven’t heard of, but whose populations are large. There are over 175 cities in China with more than one million people. Often residents cannot gain access to the brands they crave, other than via the Internet; so they increasingly shop online. And they expect fast delivery of goods. So get your mix of logistic and fulfillment partnerships spot on, including cross-border delivery networks and local delivery partners.

5. While thinking globally, act locally. Maximize cultural integration.

To reach a global audience, many brands are using Chinese spokespersons in their wider marketing communications; Nike's sponsorship of champion hurdler Liu Xiang being an obvious example. But brands should ensure their technology decisions support local culture and local buying behavior as well. For instance, payment preferences are very different, with Alipay, Union Pay and also cash-on-delivery prevalent. Additionally, locate sites inside the China firewall for access and performance benefits. Lean on local service providers that have access to China’s e-commerce ecosystem and have them ensure you have the appropriate legal authorization and licensing in place. Be aware of China’s content and filtering regulations too.

6. Develop a differentiated customer experience.

Tailor the ecommerce experience for Chinese shoppers. Adoption of multichannel and cross-channel shopping is low compared to the US and Europe, so innovative experiences should be built around mobile and social. Brands in China are experiencing rapid mobile and social ecommerce growth trajectories. China still has a relatively poor Internet infrastructure and both filtering and monitoring are widespread. Brands should seek service providers with a strong blend of technology specialists, online traders and online marketing experts.

First published in BrandZ Top 100 Most Valuable Chinese Brands 2014