Acquiring users for a new APP is hard in any market but especially in China. Big players, such as Tencent, Alibaba and Baidu compete for large market shares. And in order to compete, companies need to come up with some good and new ideas. An interesting strategy used by the new generation of Chinese e-companies is to give discounts and coupons for their users in order to establish a better position in the competitive market. This strategy involves paying users to play games, to watch videos or to convince others to join the new app. Although this strategy helps to rapidly increase the number of users, it is doesn’t take away the need for the APP to deliver value in order to have a long term profit.
China’s e-commerce market is the largest in the world and already represents more than 40% of the total global e-commerce spending. This year, China’s Singles’ day set a new record with US$30.8 and 27% growth when compared to last year. In the next four years Chinese online sales are expected to reach US$1.8 trillion which will be more than double the size of the US market.
Image: eMarketer/The Economist
The fast development of the Chinese market combined with a large and growing digital user and consumer base has contributed to a rapidly growth of domestic online sales as well as cross-border e-commerce. In part, the concerns about the safety of domestic products have pushed consumers to look abroad for brands with a strong reputation and a focus on quality. Furthermore, Chinese consumers are becoming more aware of international brands, which reflects in the increased demand for overseas products. It is worth mentioning that high-quality food, cosmetics, healthcare, baby products and electronics are on top of the list of Chinese online consumers.
Despite this big market and all the opportunities it brings, entering the Chinese ecommerce market is not easy. The Chinese government has been implementing new regulations which make this process complicated and bureaucratic. Besides that, there are a lot of available e-commerce platforms with different characteristics and functionalities, which make the strategic decision to get into Chinese market even more difficult.
Therefore, small and medium-sized companies that want to enter the Chinese e-commerce market must be aware of both the opportunities and the obstacles of this new market. In addition, it is important to understand the e-commerce platforms since choosing the right one is crucial to boost your online presence in China! It could be the difference between a thriving success story or a hasty exit.
Cross-Border E-commerce Platforms
Currently, there are more than a dozen different Cross-Border e-commerce platforms in China covering every product category. In the last few years a great number of Platforms sprang up, such as Jumei Global Store, Daling, Amazon Global, B&G, Kaola.com, Suning Global, JD Worldwide and VIP International. However, the market is still dominated by the best known platform of the biggest domestic ecommerce player, Alibaba’s Tmall Global, which holds more than 27%. Luckily this trend has been changing since smaller platforms are increasing their presence in the e-market.
One clear reason for the success of cross-border ecommerce is the fact that to enter the Chinese online market brands must have a legal presence in China. Of course some international companies would rather not invest time and money to get this governmental permission. In order to overcome this obstacle Alibaba Group and JD.com started to run Tmall Global and JD.com Worldwide, their respectively cross border ecommerce platforms. The major benefit of these platforms is to allow foreign brands to sell their products in Chinese e-market without Chinese business licenses. Besides that, Tmall Global works as first step into China in order to collect data on the market as well as their consumer.
Currently, many large global brands have their presence on these platforms since it provides high exposure to the market and allows them to benefit from the great platform quality. But it is necessary to mention that is largely compulsory for foreign brands to team up with a Tmall Partner, which is a e-commerce agency for local operations, such as national delivery, customer service and domestic warehousing. Additionally, to have a presence on these platforms the foreign company has to pay high management fees and also has to invest great amounts in order to have a real impact. In addition, the application process to start selling your products in these platforms require some product and brand specifications that could make the process harder. All in all, the benefits don’t always out-way the cost for every brand, which is why it is great there are other options nowadays!
Competing with the main platforms there are others cross border platforms such as Little Red Book (RED) or Kaola that have been increasing their presence in the Chinese market. These apps normally specialize in niche markets and smaller brands, which can help to promote a better customer experience and also to make the process of finding early adopters easier. Besides that, users can have a better interaction with the platform posting photos and recommendations which could be crucial to boost the online presence in China. As these platforms are smaller players themselves, the demands and costs related to operating a shop on there are much less daunting than with the big dominant players.
In order to help you in this strategic process of decision, we have put together key details of these alternative platforms that foreign brands can use to start their online sales in:
Kaola
Kaola is a platform that provides online services focused on selling high-quality foreign products to middle class Chinese consumers with an emphasis on the sale of large-scale products directly to buyers. The app is more popular with white-collar citizens aged 20-40 products categories and has been growing in the last few years. The platform offers different product categories such as Fashion & Apparel, Jewelry & Accessories, Sports & Outdoors, Children’s Wear & Shoes, Home & Personal Care and Nutrition and Health Food.
VIP international
VIP international is the cross-border e-commerce platform of VIP.com or Vipshop.com. This platform specialized in online discount sales. Its main strategy is to team up with popular and well-known brands by selling their excess inventory at discount prices. The app has established a great position in China’s online market and discount retail market. Some of its main focus categories are Cosmetics & Beauty, Maternity & Baby, Food & Nutrition, Home & Personal Care, Fashion & Apparel.
Little Red Book (RED)
Little Red Book (RED or XiaoHongShu) is an online sharing community which enables users to post their recommendations based on their previous experiences. From that feature it naturally added cross border sales features as well. Unlike other social media, the platform aims to offer more informative and detailed content in order to make it more authentic and build trust with Chinese users. Previously RED was mainly focused on beauty and cosmetics, however it has been expanding to other segments such as fashion, food, traveling and lifestyle. RED is one of the largest and fastest growing social e-commerce apps in China.
Each of these platforms have their own strengths and weaknesses, so it is really important to understand which are the main points that could benefit or hurt your business. Furthermore, depending on your business and strategy in China it might not be recommended to sell on too many different platforms since you will need to allocate resources to manage and promote each one of them. Besides that, each platform has different application process, rules for their logistics and users focus, which makes it harder to successfully manage different platforms at the same time. Finally, it is suggested to enter the Chinese online market selling a limited number of SKUs, adding volume as your business grows.
As you can see, in order to succeed in China a lot of research, strategy and planning is required. It is also important to be persistent, flexible and creative to adjust to different consumers’ needs. We at AgencyChina are here to help you succeed in China. Feel free to contact us if you are considering entering the market or feel you need to make a change to your current presence in China. We will provide transparent and data driven support across market entry, in-market strategy and operations.
Chinese social media giant Weibo, which was launched in 2009 and has more than 400 million monthly active users started to look for the overseas market. The social media platform is considering launching new products in different languages aiming to find new users and new countries. This is the same strategy adopted by TikTok – short form video sharing app – that has become widely popular in other countries this years. However, it is well known that Chinese tech firms are not always welcomed overseas since most of them are known for their censorship and sometimes even fake news, which raises some concerns in foreign countries.
The Chinese consumption patterns have been changing in the last few years, which is reflected in the increasingly willing to purchase more high quality products. In order to adapt to the new trends, the Chinese government announced that they will lift the tax-free ceiling for personal cross-border e-commerce retail purchases. The new regulation will be implemented at the same day as the new Electronic Commerce Law, on January 1, 2019. This change it is expected to have little influence on large international e-commerce players, however daigou – Chinese personal shopper – will be negatively committed.
After the repercussions of the latest Dolce & Gabbana campaign last month, some comments have been raised about the increasingly challenging environment of the Chinese market. However, for some Western brands China’s new generations are not so hard to please, which is reflected in great campaigns that did have positive impact in the Chinese market. Clearly, understanding the gap between the cultural expectations and the current reality is crucial to any business succeeding in China. Additional tips are; focus on the present and the future; explore collaboration with artist or designers; and recognizing the increased awareness of Chinese consumers. All these are important steps to develop a good marketing strategy in China.
Alibaba’s platform Taobao started testing a new feature last week that includes product reviews from Xiaohongshu (better known as Little Red Book or RED). RED is a growing and promising social media platform where shoppers can write reviews and share previous experiences on a wide variety of topics. With this new feature Taobao aims to provide more product details to consumers. This way they hope to cover the notorious and growing influence of content on Chinese shoppers’ purchase decisions. But the question remains, is this a good or a bad development for RED? We think it might hurt the platforms standing more than it will do good to Alibaba’s Taobao.
The social media platform RED (or Little Red Book) is an online sharing community which enables users to post their recommendations based on their previous experiences. Unlike other social media, the platform aims to offer more informative and detailed content in order to make it more authentic and build trust with Chinese users. Previously RED was mainly focused on beauty and cosmetics, however it has been expanding to other segments such as fashion, food, traveling and lifestyle. It now even provides the users the convenience to buy the products directly within its own online store. With its unique and consistent brand positioning, it is not surprising that RED has grown so drastically and has become one of the most promising marketing platform for brands.
Dolce & Gabbana has cancelled its biggest promotional event of the year, that would take place in Shanghai, after Chinese celebrities and social media users reacted against the controversial advertising campaign that was posted on D&G’s social media accounts. The campaign shows a Chinese woman trying to use chopsticks to eat some Italian foods while a narrator offers instructions on how to eat them. Many Chinese have accused the luxury brand to reinforce the cultural stereotypes and have alleged no understanding or appreciation of Chinese culture. When doing business in China is important to understand the cultural differences and have sensitivity to create campaigns.
Two of the world biggest e-commerce festivals took place in November. On the 11th China’s Singles’ Day set a record with US$30.8 billion in sales while on the 23rd the US Black Friday online sales reached around US$6.3 billion (in 2017 it was US$5 billion). This massive difference represents the contrast between US and China retail ecosystems. It shows that the biggest shopping day for the world’s most populous country happens almost exclusively online. Of course helped by the internet and the rapid adoption of mobile phones, which helped to train an entire generation of increasingly affluent consumers to buy online. Furthermore, China’s Singles’ Day is now about more than just sales, it is also a social event for consumers. In contrast, American retailers often merely slash prices or hold stock clearances with discounts.
Between January and October 2018 retail imports of cross-border e-commerce reached 67.2 billion yuan in China, up 53.7% year-on-year. Not surprising the Chinese government places great importance on developing cross-border e-commerce and other new forms of trade. Officials have said that China will expand and improve the existing policies on retail imports and exports via cross-border e-commerce to widen opening-up and unlock the potential of consumption.
