China’s ecommerce cross-border trade channel is booming. Here are three points to consider when setting up a strategy for your brand.
Last month, I wrote an article about why cross-border trade has taken off in China. In short, Chinese consumer demand for foreign goods to be purchased onshore is greater than it has ever been. So much so, that it is now encouraging businesses to set-up ecommerce sites in this booming area.
A report from Accenture/ AliResearch predicts there will be more than 200 million Chinese cross-border shoppers within the next five years.
These consumers want access to genuine, quality, foreign products and are prepared to pay a premium for it.
The report also predicts that by 2020, the transaction volume of imported goods purchased online in China will hit US$245 billion, making it the largest cross-border B2C market in the world.
Chinese consumer demand for foreign goods and a government push to actively promote cross-border ecommerce is boding well for international brands looking at this market.
Businesses selling through cross-border enjoy reduced tariffs and lower regulatory requirements (which is of particular appeal to the cosmetic, vitamin supplement and fresh food sectors).
It also provides an opportunity for brands to test the Chinese market without having to set up a physical presence in China, says Susan Corbisiero, trade commissioner, Austrade, Shanghai. “Online gives you a lot of data and access to where your products end up, and might therefore dictate your offline strategy,” adds Corbisiero.
For example, Australian supermarket Woolworths recently launched a store on Alibaba’s cross-border platform Tmall Global.
A Woolworths spokesperson told ClickZ the retailer is currently selling around 80 products to Chinese consumers through the Tmall Global store – a fraction of the 40,000 or so it has available in its Australian supermarkets.
These cover four categories: vitamins and supplements, baby, skin and hair care and food products.
Infant formula from Australia is in particular demand in China. The practice of third parties on-selling baby formula to customers in China has prompted a number of Australian retailers to limit in-store purchases to four cans per transaction.
Woolworths’ foray into the Chinese market through cross-border trade channels will be a good opportunity to test market demand for these product categories as well as side-stepping a flourishing grey-market of middlemen sellers.
Here are three considerations for brands starting a cross-border ecommerce strategy for China.
One of the primary considerations for foreign brands is how they plan to sell their products through cross-border channels. One option is to go it alone, but there are advantages to working with an established, dedicated cross-border online platform, especially for brands new to China.
The two biggest players are JD Worldwide and Tmall Global. Both are business-to-consumer (B2C) sites with slightly different models.
Tmall Global (sometimes referred to as Tmall International) is Alibaba’s cross-border platform.
It allows foreign vendors to set up an online shop and sell directly to Chinese consumers. Vendors must agree to selling only 100 percent genuine and overseas sourced products.
Payment is primarily facilitated through Alibaba’s Alipay e-payment service. Alibaba also offers logistics assistance through its Cainiao venture – a group of Alibaba-endorsed third-party logistics partners.
In August last year, famous American fashion retailer Macy’s opened a store on Tmall Global as Macy’s China.
Previously the retailer had been selling to Chinese consumers via its English-language website, then shipping goods from the U.S.
Through the Tmall Global store, inventory is warehoused in Hong Kong, speeding up delivery times to Mainland Chinese customers.
Macy’s will also be hoping its presence on Tmall Global gives it additional marketing exposure to the more than 300 million annual active users across other Alibaba online market places including popular C2C platform Taobao and B2C platform, Tmall.
JD Worldwide is the cross-border offering of JD.com (Jing Dong). It has two cross-border models. Through the ‘market place’ offering, brands set up a store and sell directly to Chinese consumers, but can still take advantage of JD.com’s sophisticated warehousing and logistics infrastructure.
The other option is ‘direct sales’. JD.com buys inventory from the overseas seller and then sells it to Chinese consumers through the cross-border platform – taking care of all logistics, warehousing and marketing.
Unilever was one of Jing Dong’s star recruits after launching JD Worldwide in April 2015, and has used the platform to test products it is not selling in China through its domestic channels.
Brands should also consider aligning with smaller, niche and specialized cross-border platforms.
For example, a beauty brand might consider Chinese online cosmetics retailer Jumei.com’s cross-border platform, Jumei Global.
For electronics there is Suning. For fashion, Vipshop.
Brands don’t need to restrict themselves to just one platform either. Since launching a cross-border strategy last year, China has become the biggest Asian market for vitamin and supplement brand Blackmores.
As part of this strategy, Blackmores has partnered with a number of platforms, including niche blogging site, Xiaohongshu.com.
Importantly, when choosing which platforms to partner with for a cross-border strategy, businesses need to do a detailed assessment.
Important questions to ask about a cross-border partner include:
- Who is the platform’s demographic?
- What is their category specialization?
- What are the trading terms?
- Who are their partners?
- How long have they been in business?
- What other brands do they work with?
- Understand the end-to-end supply chain (including how they deliver)
- Where are they located?
There are two challenges for brands coming into China. Firstly, how do you tell the hundreds of millions of Chinese online shoppers about your presence? You may be a well-known brand in your own country but that doesn’t mean you will be instantly recognized in China.
Secondly, cross-border trade is flourishing, and with a growing influx of new brands every day, so is the competition. How will your brand compete in this crowded market place?
Chinese consumer behavior is quite distinctive, says Corbisiero – selling online in China is not the same as selling in Australia or the U.S.
The big question for brands is how much branding and marketing they will need to do themselves.
Basic marketing for the China market begins with something as simple as ensuring your site is translated into Chinese.
Then it is about finding ways to stand out in a crowded market.
The Alibaba Group China’s 300 million annual active users across its online retail market places sounds like a lot of traffic, but for a brand on Tmall Global, standing out from the crowd, teaching the Chinese consumer about your brand and ensuring exposure to these consumers comes at a marketing cost. Brands need to budget for this accordingly.
Some platforms host country pavilions. This is an excellent way for smaller or less well-known products to benefit from the associated brand value of their home regions.
A Chinese consumer for example, may search within the Jing Dong sites for products from France and be directed to all the products in its European mall.
When setting up a product page it is important to include as much information as possible, above and beyond that used on most Western ecommerce sites.
Chinese consumers want to be able to compare, to look and to learn as much about a product as they can, especially if it is not familiar to them.
“You need to over produce the content to over sell it,” she says.
That means explaining what the product does and educating consumers beyond its functionality, right down to how it looks and how it is used.
Here for example, Maltesers has suggested recipes that show the product’s use beyond a simple treat.
Tell a story. Here’s a screen shot from the product page for popular French baby teething toy, Sophie La Girafe on Tmall Global.
Also include plenty of images, certificates, and detailed information about where the product is sourced, produced and manufactured.
Chinese consumers want to be assured of a product’s authenticity.
The more information provided, the better. Here is a screen shot from the JD Worldwide page of Australian dairy producer, Devondale.
As the user scrolls down, the page includes detailed images of the packaging, showing all sides.
Here is a copy of a letter explaining why the best before date appears differently on some products:
It is worth noting that this Devondale product has a 96 percent satisfaction result based on the feedback of 39,166 customers – something no marketing budget can buy.
Feedback includes comments on how the product tasted to how well the website images matched in real life.
Social proof like this cannot be controlled easily, but brands can encourage feedback, and aim to attract positive reviews through quality of products and service.
It also demonstrates that good quality, genuine goods, and transparent product information, resonate well with Chinese online buyers.
Finally, consider special packaging around Chinese holidays and gift giving.
3. Ask a lot of questions
Like any business strategy, due diligence is essential. Entering a new market like China is no exception to this.
In addition to thoroughly researching potential business partners, brands should take a wide view of the market.
- What is the long-term strategy?
- How will it evolve? For example, will you have the ability to support your customers, what is your pricing strategy and how well will you be able to meet supply and demand.
- If product isn’t selling – why not?
- Talk to people: logistics providers, the platforms themselves, and reputable consultants, including your home country’s trade office.
- Keep an eye on how cross-border is being administered. Regulations in China can change quickly.
To sum up:
Cross-border ecommerce in China is providing brands all over the world with an opportunity to enter and test their products in a lucrative market.
As more and more businesses join the fray, it will be increasingly important for brands to differentiate themselves by providing transparent and visual product information.
They should also experiment with both big and small Chinese ecommerce partners to ensure their products are exposed to very targeted audiences.
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