E-commerce Guide in China

Ecommerce in China: one of the foreign brands’ main concern, when they want to enter the Chinese market, is to know which are the best e-commerce platforms to employ. Indeed, the Middle Kingdom has become the world’s largest e-commerce market. We hope this Ecommerce guide in China will help you understand your options a bit better.

 The E-commerce market in China

China has now become a world leader in e-commerce and online shopping, with more than 800 million internet users.

In 2019, e-commerce in China recorded €867 billion in turnover, 19% more than in 2018. 1 billion users bought a product online; 80% of users searched for a product online; 94% of users visited an online store on a marketplace and 82% of users purchased a product/service online.

The annual growth rate of e-commerce in China from 2020 to 2024 is estimated at 6.9%. The largest segment of the market is dedicated to Fashion (US $ 348,700m in 2020).

With a rising middle class, the demand for better quality goods has also increased. The Chinese purchase more imported goods because they trust them more than local goods in certain categories.

Rise of cross-border ecommerce in China

In 2019, China’s cross-border e-commerce retail import market was valued at about 416 billion yuan, increasing from around 381.4 billion yuan in 2018. The market size of import e-commerce retail was forecasted to reach nearly 559 billion yuan in 2022.

Online consumption is growing at a rapid rate, but Chinese consumers require trustworthy and accessible shopping destinations. Marketplaces provide verified brand stores that give consumers a one-stop-shop. Brands need to be involved in such marketplaces for exposure and legitimacy.

Different platforms allow foreign brands to sell their products in China. However, each platform has its specific characteristics that need to be understood.

Tmall: China eCommerce leader

Tmall.com also called Tian Mao (天猫) in Chinese is China’s biggest B2C online retailer. One of the biggest tech companies in China, Alibaba, launched it in 2010. It allows foreign and local brands to sell their products. It offers a wide range of products such as apparel, food, shoes, luxury brands, and other types of products.

A few years ago, Tmall.com launched Tmall Global, which allows foreign brands to register to Tmall and to access to the Chinese market.

Sell on Tmall Global

However, Tmall Global opted for a strict entry policy. That means qualified merchants either receive an invitation in order to join the platform or they have to apply through a certified third-party agency (TP). This procedure has complicated the process of setting up a store on Tmall Global which is why JD Worldwide is an increasingly more attractive option due to its relative simplicity.

Since its fees are quite expensive, Tmall Global mostly targets Corporations that have been operating for more than two years and with annual sales of around RMB 100 million ($33 million). They also target B2C overseas businesses; and Brand owners or authorized agencies.

Alibaba’s Tmall: Why is it the most trusted ecommerce app of China?

The brands are on Tmall in the form of graphically customizable flagship stores.

The platform provides various marketing tools to help increase traffic and generate sales, they can also provide warehouse service (a Chinese address is required). Tmall’s advantages include:

• a simplified payment process, where buyers don’t necessarily have to use a credit card. In fact, it is possible to finalize purchases through the Alipay electronic payment system.
• an excellent analytical tool and periodic reports on sales trends for sellers.
• shopping festivals to attract new consumers and stimulate sales. The most famous one is the Singles’ Day Festival, which falls on 11 November and records some of the highest sales peaks of the year.

These are the requirements that are necessary to open a Tmall Shop:

• A registered corporate entity outside Mainland China.
• Retail and trade qualifications overseas.
• Be the brand owner or an authorized agency or possess the purchase voucher.
• Possess the relevant stock certificate.

Registration and running costs on Tmall:

• Security Deposit—RMB 150,000 ($23,000).
• Technical Fee—RMB30,000 ($4600) or RMB 60,000 ($92,000), per year, depending on the type of store.
• Commission—0.5% to 5 percent, depending on the type of store + 1% Alipay fee.

JD & JD worldwide: China ecommerce King of logistics?

JD is China’s largest online direct sales platform. It can count on its own national distribution network of 86 warehouses, 1620 delivery stations, and 214 collection stations located in 495 Chinese cities. JD allows sellers to open individual shop fronts and it is licensed to import food, beverage products, apparel, and shoes directly from foreign countries.

JD Worldwide: Will it beat Tmall Global?

Like Tmall, JD opened also a cross-border service, JD Worldwide, which enables foreign brands to sell directly to Chinese consumers without a Chinese address.

JD Worldwide counts on its powerful logistics network (with its warehouses or JD’s same-day and next-day delivery programs, for example) and on its zero-tolerance policy towards counterfeit products, which are a big issue in China.

JD dominates fields like home appliances and consumer electronics in China.

Register on JD:

Different eligibility requirements, similar to those of Tmall, are necessary to operate with JD Worldwide:

• Registered corporate identity outside mainland China, with registration capital of over RMB500,000 ($76,000).
• Retail and trade qualifications overseas.
• Be the brand owner or authorized agency or possess the purchase voucher.
• Possess the relevant stock certificates.

Foreign brands can operate in three different ways:

• Franchising Business Partner—this allows brands to build a JD store and to use JD warehouses to store their own products. JD assumes full responsibility for warehousing, delivery, and customer service. Which is a good thing for merchants!
• Licensing Business Partner—merchants can set up a store and complete packaging in order to ship the order. JD will supervise customer service and process invoices.
• Self-Operation Partner—merchants can sell on the JD platform. However, the merchants themselves must handle warehousing and delivery.

what are JD store registration and management costs?

Such as in Tmall, these are the costs for brands to be on JD:

• Security Deposit—RMB10,000 ($1,500) to RMB15,000 ($2300), depending on the product category.
• Technical Fee—RMB1,000 ($150) per year.
• Commission—3 to 10% + 0.85%if the JD shipping service is used

Pinduoduo: China’s eCommerce innovation leader

Pinduoduo is a recommendation based third-party platform. Aggregating demand through team purchases, it socially connects demand products to corresponding potential customers as to avoid searching and scrolling through product options. The platform has the priority to maintain the trust with and between customers and users, as well as associated brands.

Pinduoduo has become a rising star in e-commerce. As of the end of June 2020, Pinduoduo’s active users

(630 million) ranked second in the comprehensive mall category, with a penetration rate of 13% over the same period of 2019, ranking seventh in the entire network.

The active penetration of Pinduoduo has increased significantly, with a huge scale of heavy users. In June 2020, the active penetration rate of each city level increased by more than 8% year-on-year, with an average active penetration rate of 21% and reaching 116 million heavy active users.

2020, the years of recognition for Pinduoduo

In 2020, Pinduoduo started its partnership with China Post as a first step to strengthen its logistics.

Pinduoduo is famous it is famous for its group buying function; it is one of the most important e-commerce platforms after Tmall and Jd. Its strong point is the cheap price. In fact, generally, the products on the platform have very low prices. Furthermore, users can take advantage of the group buying function to further lower prices.

Affiliate Marketing with Pinduoduo

In addition to group purchases, Pinduoduo also offers other types of services that aim to merge entertainment and online shopping. Among them, we find:

• Live streaming to sponsor products sponsorship;
• Lotteries with very low participation prices;
• Mini-games integrated into the platform; Discounts in exchange for product reviews ;
• Fast and immediate electronic payment via WeChat Pay.

Pinduoduo has recently released a new mini program on WeChat called “Duoduo Biyou”. The platform sells high-end products, recommended by select kols (influencers), at highly competitive prices. Users will be able to compare the advertised products, read reviews, and then purchase them through the platform. What is surprising is how in this new mini-program, the prices of some product categories are even lower than those of the main platform of Pinduoduo, already known for the convenience of its prices.

In China, there is a huge unexplored market of third and fourth-tier cities and of the rural area of low-income families. The latter are increasingly digitally connected and eager to shop.

Pinduoduo is the perfect solution for those who want to conquer this slice of the Chinese market.

Suning Global

Suning Global is Suning’s leading platform dedicated to cross-border e-commerce. Launched in 2014, it currently features around 300 foreign shopfronts, and Suning, like Alibaba, offers its own integrated logistics service (4 aviation hubs, 12 automated pickup centers, and 660 urban distribution centers), as well as financial support services.

Suning Commerce has both an e-commerce platform and 1,600 stores in many cities between China, Hong Kong, and Japan. Suning.com is among the top three Chinese B2C platforms.

Among the main categories of best-selling products on the platform, we find household appliances and products for maternity and childhood. Suning Global is particularly used also for its multiplicity of payment options. It uses its online payment escrow service or Yi-Pay, to complete transactions in either RMB or foreign currency.

Little Red Book: Social commerce with users at its core

Little Red Book offers a good alternative for small and medium enterprises that want to enter the Chinese market. Founded in 2013, Little Red Book in a few years has become one of the largest online communities dedicated to foreign luxury brands with 250 million registered users in 2019.

It is a social commerce and that means it has both social network and e-commerce functions.

Social commerce is growing rapidly and exponentially in China, and it is easy to understand why. China, in fact, is a much-digitized country. Users spend a lot of time on their smartphones, especially on social networks. They are becoming more and more demanding and need to be stimulated in a different way. Thanks to this new approach, the user is stimulated to purchase on platforms that look much more like a social network.

RED is th to go app for Beauty, Wellness and Life style brands

Retail sales via social commerce in China has significant growth potential, according to data from market intelligence firm Emarketer. Sales in the segment are expected to reach $242.41 billion this year and nearly double to $474.81 billion by 2023.

Little Red Book is based on a “content-driven” model, which gives great importance to content. It was born as a shopping guide and it mainly attracts consumers who reward quality and authenticity. 60% of users are Millennials and more than 70% live in first or second-tier cities. 85% of users are women.

Alibaba and Tencent support this platform. There is a collaboration between Taobao and Xiao Hong Shu: User-generated posts on Little Red Book appear in product page reviews on Taobao. Little Red Book allows in-app purchases and accepts WeChat pay and Alipay as payment methods.

WeChat Store and WeChat mini-programs: Ecommerce alternative to Tmall and Jd.com?

In 2017, it started to be popular to have a WeChat Store and to do Business among your followers. WeChat is a close circle but it is convenient for users.

Sell on Wechat Stores

A WeChat Store is a mobile website built or optimized to work on WeChat, accessible from the corporate account menu. Alternatively, a cheaper option is to use a platform to create your own ad hoc WeChat store, less customizable but much faster and more convenient. The WeChat store provider market offers thousands of options, but Youzan is the most popular WeChat store provider.

The company runs thousands of stores in mainland China, both for small brands and large companies. These WeChat stores offer a wide variety of features. For example, business solutions based on gaming techniques, group purchases (special prices for groups of buyers), and selling through affiliation.

Users who follow the brand can log into the site and pay for their purchases via WeChat Pay.

Use Wechat mini-program

WeChat mini-programs are a kind of “sub-application”: an app inside WeChat. As a result, users will no longer have to use or download new apps because they can already find in WeChat what they are looking for. The mini-programs concern all types of services: sales, e-commerce, and government services.

Mini-programs are among the tools that can catch the interest and attention of a large audience of potential customers in China. They also offer additional features to the classic e-commerce platforms. Among them, we find, for example, the personalization of products, gift cards, discounts, and the possibility of making group purchases.

Mia.com, Jumei.com and Kaola: niche cross-border e-commerce platforms

• Mia.com is the leading website for the sale of baby products in China. Mia.com has a less generalist approach, reflecting a niche market targeting new Chinese parents influenced by Western habits. Its purpose is to provide Chinese parents with everything they need, from milk powder to maternity clothes. It mainly markets products from international companies. (70%)
• Jumei.com instead is a real online shopping center that offers cosmetics and luxury products. Jumei has always declared to buy from trusted channels only, to ensure customer authenticity, reliability, and efficient after-sales service. It has a female target.
• Launched in 2015 and acquired by Alibaba in 2019, Kaola is one of the leading cross-border e-commerce platforms. It collaborates with brands of clothing, maternity, beauty, and many other product categories. By buying directly from overseas brands, it avoids intermediaries and local distributors. In this way, it can offer products at competitive prices.

Foreign brands must choose the best platform according to their products and to their objectives. They have to consider in which fields each platform is best at (Food & Beverages for Yihaodian, electronic devices for JD…), but also, the prices and the option they prefer to choose (Franchise, License…).

Contact us : agency@marketingtochina.com

China Ecommerce guide: want to sell in China?

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