Introduction to China E-Commerce
Home to more than 1.3 billion residents, China boasts one of the most powerful consumer markets on the planet. And as the world’s most populous nation develops economically and domestic consumption grows, the opportunity for global brands to participate in the market through e-commerce is becoming more and more important.
With a $1.1 trillion USD total e-commerce market (the world’s largest), China is a region that simply cannot be ignored by any brand looking to establish a global presence and grow international revenue.
However, while the public discourse has been quite public about the massive amounts of money flowing in and out of China, many initial questions arise about the scope and nature of that opportunity.
At a very base level, what needs to be identified for brands looking to engage in China e-commerce sales is:
- How much of that $1.1 trillion USD pie is available for a specific category? How much of that goes to shoes, pet foods, luxury goods, business services, cosmetics, vitamins, etc.?
- Within those categories, how do specific sub-categories perform in the market?
- What are the third-party platforms that Chinese consumers visit and shop on?
- How does the fact that China is a “mobile first / mobile only” country affect sales?
- How does a company market its products to the public?
- What are the administrative and licensing requirements to sell products in the market?
- What sort of import and export frameworks do brands companies have to be mindful of?
- And countless others.
Once a company can answer some of these questions, there are dozens of deeper dive questions that exist before they can enter the market effectively:
- Which Tmall Partner (TP) should they work with?
- Should they work on the domestic platforms of Tmall and JD or should they stick with the global offerings?
- Which key opinion leaders (KOLs) should they work with?
- What sort of promotions resonate with Chinese consumers?
- What does it take, at a technical level, to activate a dedicated website inside of the firewall?
- Would it make sense to host a website inside or outside of China’s great firewall?
- Should a brand focus on PPC marketing or social media?
- Is it more profitable to partner with a distributor inside the market or to sell direct to consumers?
- And many more.
Brands who are confident about entering the Chinese market would do well to enter the market with answers to those and other questions, and leverage power of big data to get accurate answers that provide a go-forward map.
China E-Commerce Landscape
For those unfamiliar, China’s IT and e-commerce landscape is completely different than that of the United States and the rest of the world. While the global e-commerce market is dominated by Amazon, eBay and other similar platforms, those websites are unavailable inside the middle kingdom, blocked by The Great Firewall.
However, Chinese entrepreneurs have developed dynamic and highly popular alternatives that are catered to Chinese consumers, both in the way that users interact with the platforms and in the technological infrastructure that has to deal with the effects of the firewall.
So, what are those alternatives?
Taobao– owned by Alibaba, Taobao facilitates consumer to consumer transactions in China (a North American equivalent would be Craigslist). Formed in 2003, it is actually the world’s largest e-commerce website by traffic and is China’s biggest marketplace. As of 2016, it facilitated over 1 billion product listings.
Tmall – also owned by Alibaba, is designed to facilitate business to consumer transactions (North American equivalent is Amazon.com). Both international and Chinese businesses use Tmall to sell to hundreds of millions of Chinese netizens.
With more than 500 million monthly active users, it is often thought of as the first touchpoint for international brands to enter China’s e-commerce space. Fortune 500 brands sell items on Tmall, including Nike, P&G, Luxottica, Apple, and many more.
As of 2014, the platform offers both a domestic and international portal, with different costs and pricing structures.
JD.com – Also known as Jingdong, JD is Alibaba’s biggest competitor in the e-commerce space. Though not quite as popular as Tmall in terms of monthly active users (JD only has 302 million as of 2018), it has established itself as a very real and notable player in the market.
Noted for their signature product offerings in the personal technology space and their innovative approaches to logistics, delivery, autonomous technology and robots, JD is a strong alternative to Alibaba and maybe the best platform for certain brands and their products to sell directly to China’s consumers.
Pinduoduo – the leader in China’s group buying deals space. Founded in 2015, the platform has received significant investments from China’s tech giants like Tencent. As of 2018, the platform has announced that they are home to more than 200 million users.
Xiaohongshu – also known as “RED” or “Little Red Book”, the platform is China’s leading social e-commerce platform. With more than 483.2 million users of their own, RED has done a fantastic job of targeting younger, affluent users (Generation Z). Although the platform was initially built as a social media image sharing service focused on travel (think Instagram for China), management soon discovered that users were leveraging the platform to source and disseminate advice around fashion and cosmetics in China and around the world.
It has since become a trusted source in the apparel and cosmetics community and is now home to some of China’s most influential KOL’s, where they communicate with their followers and provide recommendations around specific products. As of May 2018, the platform has more than 100 million users and is quickly growing.
However, Chinese e-commerce platforms do not end there! With industry focused platforms like Yihaodian, VIP.com and Dangdang, as well as offshoots of tech companies like WeChat that have built in e-commerce capabilities, there is no shortage of options for companies looking to enter the Chinese market. As for which platform is best for which company? That’s where data comes in to play.
Growth-focused organizations understand that with market expansion and platform entry, there are inherent risks that accompany great opportunities. There is a myriad of questions that need to be answered and risks that need to be taken in order to succeed in any new market. Whether there are surprising costs, unclear licensing protocols, unanticipated weaknesses relative to existing competitors in the market, or perhaps a simple lack of demand, there is no shortage of risks that companies face.
However, while those risks cannot be avoided, they can be mitigated.
In order to ensure that organizations are making the correct moves in China and Japan’s burgeoning e-commerce markets, it is vital that they have the right data and market research in hand to ensure they understand the size and scope of the opportunity they face, so they can then decide how best to capitalize on it in order to ensure the highest return.
So, the question is, what do Chinese and Japanese consumers want and what is the size of that opportunity for a brand?
WPIC leverages the power of big data to ensure that a brand’s market entry into China and Japan is handled effectively, with full visibility and insights into the market. Providing a three-dimensional blueprint for brands, WPIC has developed powerful business intelligence tools to identify the scope of the opportunity at an industry, category, sub-category and individual SKU level.
Do consumers prefer blue t-shirts or red ones? Do yoga pants priced above $100 USD sell inside the market? At what age do children start riding bicycles over $500 USD? How does sizing change, depending on a brand’s geographic market? Who are the top competitors in a category and which SKU’s are selling most frequently? Which countries are the top exporters of cherries, blueberries and lettuce?
Thanks to WPIC’s industry-leading BI tools, the power of data in an otherwise unclear market is at any organization’s fingertips.
Getting control of a brand’s IP through trademark registration is arguably the first step that needs to be taken when companies are considering expansion of their business in China. This step is key to overcoming some of the most common barriers to success in the market. Foreign companies who neglect or delay this crucial step often find themselves facing additional unnecessary challenges.
In trademark law, China’s framework is very different from that of almost all other countries, including the United States. While many Western countries abide by the “first to use” law, China follows the “first to file” law. This means that the party filing a trademark first with the China Trade Mark Office (regardless of its legitimacy) is eligible to sell goods under that trademark, regardless of whether that party can demonstrate that the trademark has been used in the business.
Ultimately, trademark disputes can result in a significant loss of revenue and a weakened capacity to control brand experience for customers. Other main issues that can arise due to IP infringement include:
– Channel integrity
– Price integrity
– Manufacturers selling under the table
If a business is considering either expansion to China or is already in the market and there are existing intellectual property infringement problems, the first crucial step to take is to partner with the right entity and ensure that your company is the first to file inside the market, empowering management take to take control of their brands.
Fortunately for brands, WPIC has developed Discripto, a distributed script engine tool that tells brands each instance of IP infringement on major Chinese e-commerce platforms like Alibaba’s Taobao.
In addition to telling companies which entity has filed for which trademarks inside China, Discripto, at its highest level, downloads each instance of a brand’s transactions on e-commerce.
Simply put, if a brand does not want unauthorized entities like re-sellers selling specific items on Taobao, Discripto can search for those specific items and have a full record of each time that item sells.
From Discripto, WPIC can report results to the platforms with the names of each merchant that is violating the terms of the platform (by selling unauthorized items), along with examples and evidence. Alibaba then notifies these violators of the infringement and, after a certain appeal process takes place, items are taken down off of the platform.