Online shopping is a high growth market in China, with 10% of transactions happening online; this is predicted to grow to around 20% by 2017 (Bysoft China). Chinese consumers are embracing online stores and demanding more and more online-to-offline (O2O) services. Physical retailers are scrambling to complement their showroom with sophisticated online services. When looking to build a brand in China, using eCommerce options, businesses need to be aware of the dynamic nature of this space.
Online shopping is moving from C2C to a B2C market; right now it is about 50/50 but B2C is growing. Top performing categories online are apparel, packaged food, beauty and personal care, consumer electronics and small appliances, and household products. Rising up the ranks are travel products, fresh food, and mother and baby products (McKinsey).
To be ready to take on eCommerce you first need to localise your brand and then ensure your shop management, compliance (legal and product), logistics and supply (fulfilment) processes are functional. In this fast paced marketplace it is a case of getting in there before Chinese brands take market share.
Factors that need to be considered when reviewing online shopping options:
- Average basket price in China is lower than the rest of the world, however consumers buy more frequently. If too expensive online you will not get sales.
- Tier 1 cities make up 50% of online sales currently. Tier 2, 3 and 4 cities are where there is real growth opportunity (cheaper too).
- eCommerce in China is all about marketplaces (eg. Tmall, JD.com etc), rather than your own eCommerce website or WeChat store. Why? Chinese people don’t trust you – they trust the marketplace.
- Pages typically have a lot of information and visual elements (the more graphic the better). Foreign brands do not do this well enough. New banners and new offers are needed daily or weekly.
- 60% of customers will use the chat functionality before they buy. An O2O strategy is game changing in this space.
- Brand Awareness. All your marketing channels need to be aligned. Invest in brand awareness and advertising. Creating WOM is essential.