Cross border E-commerce set to reach 25% of the Chinese population by 2020

China, is the world leader in e-commerce:

In modern China a significant level of growth of China is fueled by e-commerce. It has  become the largest e-commerce market in the world and with the rise of Alibaba at the forefront of online shopping developments in terms of both user experience and technological advances.

Foreign goods remain popular with Chinese consumers compared to brands from home. They are often seen as a byword for quality. By 2020 forecasts suggest that a quarter of the total population of China is expected to order items through cross-border e-commerce. That is a projection of 291.8 million online buyers.

E-commerce Infrastructure:

The main reason for this continued growth is an improving delivery infrastructure. Alibaba now have the most extensive delivery network in the world, with all 1st, 2nd and third tier cities in China being catered for. They are also expanding out to more rural area’s. Third tier city populations becoming more connected online to e-commerce services will be a key growth area in the next five years.

It is also a case of ease, congested Chinese cities and pollution has been dissuading shoppers and encouraging them to go online, in hectic modern China the digital environment dominates and consumers are looking towards online shopping in order to utilize their time more effectively.

Chinese trust foreign brands:

There is a greater confidence in the quality of foreign products than Chinese brands, especially regarding luxury items and food products such as powdered baby milk. Both Alibaba and JD.com (the two largest platforms) are attracting many foreign brands. 82.8 % of Chinese e-commerce market is dominated by two local players : Tmall (Alibaba) and JD.com. Foreign brands therefore must enter the market through these domestic platforms in order to gain visibility.

Tmall Global :

Tmall global was specifically designed by Alibaba to host ‘stores’ for international brands, it is the largest online outlet for western products in China. JD.com are also launching a similar foreign section service. The guarantee of authenticity in a market full of counterfeit products is the reason for the growth and appeal in this western branded sector.

Changes in policy:

Recently, the Chinese government introduced  new tax policy to effectively raise the price of goods over 2,000 RMB (USD 308) from abroad. This new policy of value added tax (VAT) imposed on the import will particularly impact on e-retailers that sell luxury goods as only goods under the value of 2.000 RMB (USD $308) will be subject to tax relief.

This new tax is not however surprising and will largely effect luxury brands whom can afford higher taxes due to the high cost and return on their investment in China in terms of sales. For the vast majority of imported products this new tax will have little effect.

A host of Chinese E-commerce channels:

It is important to familiarise yourself with the variety of e-commerce channels. Alibaba and JD.com dominate the market but there is growth in smaller, niche stores that are attracting consumers looking to differentiate themselves from the mainstream. Many fashion brands now set up their own stores online.

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Growth of the micro store on WeChat:

Micro stores within the WeChat (the largest social media platform in China) are growing phenomenon. Users link their WeChat accounts up to their banking and can now browse e-stores within the application making it easy to purchase goods in this manner.

This is an example of how China is at the forefront of combining social media and e-commerce in one integrated service. This means quality content promoting your goods on social media can lead directly to sales within the same platform. You can also utilize ‘apps within the app’ on WeChat where you fully customize your own page, offer customer services, present your product range and then allow purchases too.

 

Benji is a digital marketing and e-commerce specialist based in Shanghai, China. For more information see his blog and website here.

 

 

 

 

Chinese E-Commerce Giant Alibaba’s Shopping Festival Breaks Online Sales Record.

Chinese E-Commerce Marketplace Alibaba Records $5.78 Billion in Sales, Topping Last Year’s Sales in Half a Day.

The country’s biggest online shopping day of the year, also the biggest on the planet, have set another record.

After only about half a day, Alibaba Group Holding Ltd. said sales on its online shopping sites had topped $3.1 billion – last year’s total for the one day 11.11 Shopping Festival.

The company recorded 35.19 billion yuan ($5.78 billion) in transactions by the end of the day. Chinese online shoppers spent more in 24 hours than the $2.5 billion that Americans spent online on Black Friday and Cyber Monday combined. This is a strong reminder of how lucrative the e-commerce market in China is, surpassing the US in terms of consumer numbers and total spending. In the first six minutes of the 11.11 shopping festival transactions exceeded an incredible one billion Yuan.

The Alibaba Nov. 11 sale is a tradition which started in 2009, when 27 merchants on the company’s Tmall site offered discounts to increase sales during a usually slow period. The concept was then subsequently developed and intelligently marketed alongside China’s ‘singles day’, a celebration of independence, now defined (in part) through one’s purchases at discounted prices.

This year’s sales record demonstrates the rising power of the Chinese consumer and the increasing presence of e-commerce in a country where the physical, retail infrastructure isn’t as well-developed as it is in the U.S. It also shows the rising power of Chinese brands, with smartphone maker Xiaomi Inc. and electronics and appliances supplier Haier Electronics Group Co among the top sellers.

In the opening three minutes, Xiaomi said it sold 110,000 of its new Mi 3 phone and another 110,000 of its Hongmi phone, totaling 178 million yuan in transactions. After half an hour, the company’s Tmall store had 300 million yuan in transactions. Chinese brands such as Xiaomi are flexing their muscles with sales figures such as this. This also demonstrates that China is no longer simply a factory for the rest of the world but a rapidly developing country that is modernizing at a head spinning pace. This whole venture was engineered and executed by a Chinese e-commerce firm with domestic, Chinese technology brands thriving.

As a direct result of such Chinese sales figures the number of expats and business people learning Mandarin is also dramatically increasing, an understanding of the language has become a pre-requisite to succeed in E-commerce here. Language specialists ‘Tailor Made Chinese’ have stressed that it is ‘vital for expats to learn and speak Chinese to succeed in business’.

Examples such as this reflect the vast potential for Western brands in China, for more information on marketing and expanding your business into China see Benji Lamb’s marketing website and blog.

3rd Party Brands Online is Almost Mission Impossible

The WSJ has another interesting piece on the hotly covered ecommerce startup Jet.com. If you’re selling third party brands online you’ll know this but if you’re thinking about it please read on:

Over the summer, the company said it would spend $100 million on ads in the first 12 months after the site opened. In the recent plan, that total had grown to nearly $300 million. The money is fueling television spots, subway posters and online ads—including nearly $10 million spent on Google in October, according to people familiar with the figure.

It takes $300 million to market a third party branded ecommerce website in 2015. Ouch.

Putting aside the fact Jet is a large, venture back outfit, the costs for any startup doing the same will still be very steep. This is what killed Webvan and caused the dotcom bubble. In essence, competition in ecommerce has the same economic factors as physical offline commerce. Sometimes people forget to be rational with customer acquisition.

So how do you compete other than paid media? One answer is social media aka word of mouth and arguably it’s is the best route to market today for online ecommerce startups. It’s also something Jet will be hoping to rely on in the future (as Amazon does) to avoid becoming another Webvan.

This Isn’t Your Parents Holiday Season

Fortune touches upon how Holiday Season shopping is a bit different to times gone by:

This suggests a shift in the way that Americans shop. In the past, retailers had to hire more people to work cash registers and sales floors; Amazon’s holiday workers will be fulfilling warehouse roles in fulfillment and sorting facilities.

Yes, we still love to browse stores during a time when many of us take a break to enjoy family-time. And yet, people browsing are increasingly doing the buying part online. As the article suggests, that means more orders in the carts of online retailers and less in the carts of physical stores unless the latter is on top of multi-channel.

All of this means getting your warehouse into order has never been more important.

Searching For Products Online

A interesting piece by Fool notes just how powerful and influential Amazon is in the product search funnel. They mention a recent survey result:

Nonetheless, a recent survey commissioned by BloomReach found that 44% of online shoppers in the U.S. began their product searches on Amazon.com. Just 34% use search engines such as Google, and the rest use other retailers’ websites. That’s a pretty poor position for the Alphabet company, which relies on product-related searches for a big chunk of advertising. What’s more, the prospects are good that Amazon will continue to gobble up product-search share.

Interesting stuff, read more here.

The question in my mind is; will mobile help Google i.e can they innovate in voice (Google Now) or visual (Glass) so Amazon is less relevant or perhaps will mobile make Google less important in product search?

The answer not only affects Google but almost every merchant and marketer on the planet.

Five Key Features of Chinese E-commerce

The E-commerce sector in China is an incredibly lucrative one. An internet penetration rate of just under 50% results in 600 million Chinese citizens having access to the internet. E-retailing is therefore a key opportunity for western brands who can establish a presence in the mysterious orient without having to physically move operations here. With the large potential consumer base coupled with the relatively low costs of operating online, this is a significant opportunity for western brands.
Here are five unique features of Chinese e-commerce.
China is the largest market for e-commerce in the world
Forbes reported that in China “the e-retail market is estimated to grow to over $1 trillion by 2018”, it could therefore become larger than the e-commerce markets of the U.S, Britain, Japan, Germany, and France combined. There were more than 360 million online shoppers in China in 2014, more than the entire population of the U.S. Due to rapid urbanisation in China cities are increasingly more congested, polluted and crowded with more pressure put on infrastructure and public services. Many Chinese as a result turn to online shopping to avoid the crowds, this coupled with faster delivery times leads to more purchases.
The Chinese popularly purchase fashion items, cosmetics and entertainment based products online.
E-commerce has ‘gone mobile’ in China
E-commerce has truly gone mobile in China, online shopping conducted on smartphones, tablets, and other mobile devices will reach US $334 billion in 2015, mobile shopping will thus account for 49.7 percent of ecommerce expenditure. With the rise of the smart phone/tablet (phone sales have increased 17% from the previous year) and user friendly apps, the Chinese consumer’s life is increasingly centred around their mobile. This produces an avid consumer who seeks to purchase ‘on the go’ without relying on physical stores or locations.
The e-commerce landscape is different
The e-commerce market is unique in China largely due to internet censorship, many western e-commerce giants have not been able to successfully expand into the middle kingdom due to state restrictions. This is also evidence that the Chinese market is very different, you cannot simply transplant an existing business model that works in the west into China.
As a result the largest e-commerce websites in China are domestic firms that have grown to cater for the unique demands of the market here.
Who are the main players?
The Chinese internet giant Alibaba own the two largest e-commerce platforms.
Tao Bao – Tao Bao is owned by online giants Alibaba and is the most successful online retail platform in China. Taobao facilitates consumer to consumer (C2C) retail by providing a platform for small businesses and entrepreneurs to open online stores. Sellers can post goods to sell at a fixed price but also in auction (although this makes up a very small percentage of sales).
Unlike eBay who charge sellers on a transaction basis, Taobao offers the basic service to sellers for free.
Taobao also offers an advertising/promotion service to monetize traffic, which sellers will popularly pay to participate. Taobao provides two lists, an ‘organic’ listing, where sellers are listed for free, as well as a ‘paid’ listing, where sellers pay Taobao to increase their exposure to potential buyers.
The Chinese greatly value direct communication so setting up a messaging system between buyers has also proved popular, users can rate sellers and leave reviews which are strongly heeded in China.
TmallTmall has become a popular e-commerce platform where Chinese shoppers are able to purchase international and local brands.
It was launched in 2008 as an e-commerce website with the aim to host official brand ‘shops’. This greatly appeals to the Chinese as there are so many fake and counterfeit goods circulating, they want to ensure brands are genuine and will pay a premium for this.
Tmall Global was then launched in 2014 with the purpose of promoting foreign brands and facilitating their access to the Chinese market. Nowadays, Tmall has more than 70,000 brands in 50,000 stores.

Other sites such as JD.com or yhd.com are also growing in popularity but Alibaba currently have the e-commerce monopoly in the middle kingdom.

The Chinese actively share their purchases on social media

Shoppers are incredibly active in terms of their online communication, they will often share their purchase decisions with their network on social media outlets such as Weibo or WeChat. Many Chinese online platforms offer consumers the chance to share their purchases directly after they are made online. The Chinese particularly place great trust in their immediate social circle so linking e-commerce to social networks is an important cross-over to capitalize upon.
Understanding the right channels and the market is key, many firms will partner with local, specialist agencies to develop this knowledge and utilize their connections in China. Establishing connections with online retailers is key, of course the language barrier can be an issue (there are still relatively low levels of English) so having a Mandarin speaker and their knowledge is vital.
Benji Lamb has lived in Shanghai for five years and specializes in e-commerce, digital marketing, and social networking in China. He is passionate about finding solutions for western firms in the aptly named mysterious orient. For more information see his marketing website and blog.

Etsy IPO and What We Can All Learn

Etsy’s long awaited IPO is finally happening with the release of their S1 filing today. Surprisingly, unlike many of the classic ‘marketplace’ ecommerce companies like Ebay, the company is loss making:

The company registered a $4.9 million net loss on $108.7 million in revenue in 2014. The prior year, Etsy was actually closer to profitability, with a $796,000 loss

That aside, there are a couple of pieces of information related to marketing and loyalty that I’d like to point out and may be useful to you running an ecommerce business. First up, marketing:

We believe that the rapid growth of our marketplace is a testament to our compelling value proposition for Etsy sellers and Etsy buyers. Etsy sellers and Etsy buyers have been our best marketers, and the majority of our visits have come from direct and organic channels. Historically, we have invested relatively small amounts in marketing. We spent only $10.9 million on marketing in 2012 and only $17.9 million in 2013. In 2014, we began increasing our brand and digital marketing efforts and spent $39.7 million in marketing, up 122% from 2013.

In essence, let our customers market our company and our products. Easier said than done right? But it’s absolutely the right strategy to compete in today’s world where everyone is fighting for attention, just look at Apple. Yes, the iPhone maker spends a ton on marketing – especially traditional advertising like TV and print – and yet, look at their social media strategy or lack of it. The whole focus of successful companies like Apple and in alignment with Etsy’s marketing strategy is the notion that you both let (and encourage) customers to do marketing on your behalf.

Some call this word of mouth and more formally, ‘organic’ but whatever, it’s where you want to be. And on loyalty:

Our members’ repeat sales and purchases drive GMS growth. In 2014, 78.5% of our GMS resulted from repeat purchases made by Etsy buyers, and 99.3% of our GMS was generated by repeat sales made by Etsy sellers.

Over three quarters of sales from repeat customers; some would say this is a sign of a small customer base but remember what happened during the .com boom with all of those ecommerce companies who bought customers and lusted after those sales; they burned off course. You are far better off with a smaller, more engaged group of loyal customers. Amazon started with book buyers, Ebay with coin collectors, Netflix with DVD by mail and so-on – you want to start small and then grow horizontally into other categories or customers over-time.

Finally, if you’re wondering what the typical Etsy customer (aka ecommerce business) does, check out this graphic form the S1. You won’t be surprised to learn that the vast majority of time is dedicated to inventory – circa 70% in the Etsy seller’s case. The rest? Broadly split between marketing and administrative tasks. Running a company can be very exciting but much of time, it’s a case of getting your head down and working through the stuff that just needs to get done.