Types of cross-border e-commerce in China
Chinese consumers almost exclusively shop on online marketplaces, instead of stand-alone sites from brands. In general, there are 5 different types of 3rd-party platforms in China:
Hypermarkets adopt a B2B2C model, which is fundamentally different from online malls. Such markets (e.g. Jumei and Koala) purchase from foreign brands and sell in on the platform. Consequently, hypermarkets charge a markup from wholesale price to retail price.
Such marketplaces also buy goods directly from overseas suppliers. However, specialty markets only focus on a specific product category (e.g. fashion; baby care), target audience (e.g. young female; new mothers) or geographic location (e.g. Korean; Japan). Although traffic is lower, specialty marketplaces usually generate more qualified prospects and thus higher conversion rate.
Flash sales websites
Flash sales sites offer high discounts for brands that just entered China, or excessive inventories from high-end brands. Such websites can be an effective tool for foreign brands to test their product in the Chinese market, before investing substantially on ecommerce activities. Meanwhile in general, flash sales can be used as a digital marketing tool to boost brand exposure in China.
Such stores operates on WeChat – the #1 killer messaging App in China. Verified merchants can open an in-app store and sell to millions of Wechat users. Wechat also offers its own payment system for customers and merchants to pay and collect money.
How should I choose the most suitable platform?
As with many other digital marketing tools in China, no single platform fits it all. Hence, it’s always beneficial to adopt a multi-channel approach. In general, there’re 2 ways to enter China through cross-border ecommerce platforms:
1. Fast growth strategy (high cost, fast growth)
Under such model, companies usually start by establishing a flagship store on online malls/hypermarkets. By doing so, brands are able to quickly boost traffic & brand visibility. Also, they are able to gather first-hand consumer feedback and optimize future plans. Nonetheless, setup cost and regulatory barriers are high, and brands need to invest tremendously to fight against competition within each online mall/marketplace.
2. Organic growth strategy (low cost, slow growth)
Smaller brands often follows the path of Wechat store (market test) → Specialty market/hypermarket (exposure) → online mall (stable business). Under this model brands face less financial risks, and are able to use social marketing to target their audience. However, initial sales volume will be low and heavy investment on branding is needed to attract prospects.
As cross-border ecommerce is booming in China, it’s critical for foreign companies to evaluate your goal and budget etc. before settling down for any platform.
(Resources from ‘China Cross-border E-commerce Guidebook‘ published by the Consulate General of the Netherlands in Shanghai)