In this article, I will elaborate on 3 hidden aspects of the Chinese e-commerce scene. I aim to explore consumer behaviour, e-commerce and digital omni-channels, and market trends in China from the perspective of a native e-commerce marketer.
It’s first important to understand what channels exist in Chinese e-commerce. We’ll then discover the importance of distributing quality content in the Chinese market. Finally, we’ll look at why it’s important to understand the wider e-commerce market in China – particularly as some mentalities may seem unusual to those who are unfamiliar.
We at Launch-in-China Operations Consulting, work closely with Chinese top e-commerce B2C and B2B platforms. We are currently offering (especially those operating in fast moving consumer goods (FMCG) channels) an advantageous content marketing+sales package quote now. The package includes: 1 brand + min.10 products + 1 advertorial + KOL marketing and sales to top Chinese e-commerce players. Right now, we are deploying a series of technology-based methods to help you gain an insight into omni-channel digital marketing and sales in the Chinese market.
Please feel free to write to me at ting@launch-in-china.com and we can discuss your goals further. I’m also on LinkedIn, for those who want to connect.
The following info-graphic demonstrates the opportunities available in Chinese cross-border eCommerce.
(Source: iResearch and McKinsey)
1. Chinese’ overseas shopping (haigou) behaviours can currently be separated into 3 channels. Which one do you identify with?
Let’s explore the main channels through which Chinese consumers buy overseas goods. The situation in China is quite unique, and may be different to what many of us are used to.
- Chinese cross-border e-commerce platforms:
5000 Chinese inbound cross-border e-commerce platforms didn’t just come into existence out of the blue. They are mostly reliant on free trade zone (FTZ) facilities, benefitting from convenient customs terms and advantageous postal tax policy. It’s important to study their business model and sales strategy in order to serve their needs. For example, some are positioned with unique functionalities like social shopping, some specialize in making the infamous famous, and some focus on outlet, selling in great quantity. My previous article lists 7 stereotypical forms of e-commerce set-up that exist in China. Regardless of what channels you choose, it’s important to have formulated a wider strategy. Supply can easily become bottlenecked if promotion strategies are not properly aligned with marketing strategies and production capacity.
- Haitao: purchasing behaviour directly through foreign e-commerce platforms:
These platforms at a minimum provide an English-language version; and sometimes, like Net-a-porter, are also translated into Chinese. In most circumstances these platforms are still limited by language and payment methods, leaving certain groups of customers unsatisfied. You can see that some modern retailers have become very proactive in their pursuit to gain market share in China, by providing an advanced logistics force and payment solutions suitable for Chinese consumers. These factors can be costly for small B2C platforms, and so steadily scaling up with suitable partnerships is crucial.
(Source: Net-a-porter)
- Daigou: C2C purchasing process through intermediary buyers:
Purchasing one-to-one through individuals living overseas, ‘daigou’ is a targeted shopping process with personal suggestion and promotion, typically utilizing the WeChat channel in a very engaged process. The disadvantage of this method of shopping comes in the form of a higher price. This is because the buy-in price is most likely the local retail price, however there is a chance of discount.
The ‘daigou’ method can still be advantageous when compared to normal imported goods, as tax is exempted or avoided. This phenomenon will likely persevere for some time due to import and postal structures, logistical barriers and quality and service security, not to forget the very fact that it’s difficult to differentiate between daigou and personal mail. The personal engagement that comes with this process is reassuring, and attractive to consumers. It is clear that there are opportunities to utilize this kind of powerful sales force in a regulated way, but this will require technology and investment.
(A very articulate piece of copywriting from a ‘daigou’ sales person, as seen on WeChat)
The opportunity is that you can think of your distribution channels in terms of the 3 aforementioned types above. However, it’s also important to consider distribution strategy, trading terms, inspection and selection based on which operational model being used. Furthermore, building trust with Chinese e-commerce players will certainly not be as visual or transparent as the e-commerce site itself! This can often present quite a challenge. My suggestion is to work with a native Chinese speaker, through an agency that truly has strategic insights to interpret all situations comprehensively. With this assistance, you can formulate your tactics and operations.
It shouldn’t be presumed that Chinese businesses are only out to cheat and defraud. Fraudulence and manipulations are still seen in China, like everywhere else in the world. Rather, an increasing number of negative cases are down to simple misunderstandings rather than any deliberate fraud. A better understanding of Chinese business and cultural mentalities will result in less vulnerability from this type of situation.
2. Content is the soul… and distribution of content is the king.
Product quality is not much of an issue as long as your product of European design and manufacture. Rather, the importance lies in your content. The following points should arouse your attention as to why emphasis is continually put on Chinese localized content and strategy.
The image below demonstrates that the cross-border e-commerce sales funnel as a whole process is tied together with one word: content.
(Source: Carat Chemistry)
Below are some things you should know about when creating content for the Chinese market:
- Branding kit:
Two facts lie at the heart of Chinese consumer behavior – exaggeration and congregation. Once content is created, there is a large chance it will spread in a uniform format; original contents are usually respected when provided. If there are no original contents that can be easily accessed, creativity and exaggerations will surge in the e-commerce world. The most affected category in this respect is personal care/skin care.
Nonetheless, the Chinese language is a beautiful and powerful one. Hype can be generated and your sales can be boosted simply by having a great copywriter; but be very careful when first creating an image to ensure it’s integrated with your overall strategy. Distributing in the right way and through the right channels from the very beginning is crucial.
- Key opinion leader (KOL) marketing on media and social media:
WeChat, China’s most popular social media platform, has 650 million active users. A vast majority of these people check the app multiple times a day. This very fact, like the whole Chinese social media landscape, is overwhelming and exciting. This further reinforces that content is the soul of your offering. If you only care about sales without any content, all you have is a commodity product range. Before long, “siblings” of your products will emerge in the Chinese domestic market, and it won’t be much longer before you start losing clients. Using key opinion leaders plays a very important role in generating word of mouth. Careful positioning and public relations, combined with the use of these key opinion leaders, are doubtless a must-have skill for rapid reputation building and maintaining an image. Chinese key opinion leaders have, on average, about 300,000 followers; it’s not unusual for a Chinese celebrity to have upwards of 20 million.
On another note, there is a strange but rather influential phenomenon happening now in the Chinese digital marketing and media world – the emergence of an internet language. This ‘dialect’, only used online, is virtually incomprehensible to a native Chinese speaker who hasn’t read Chinese internet content for the past 2 years. However, it reads like a charm for internet-savvy Chinese netizens.
(Source: a typical blog from a key opinion leader)
- We Media:
We Media might be another unique marketing phenomenon in China. We Media means that every individual is transformed into a media channel carrying his or her own power to influence the consumer world. We Media grows into a form of KOL marketing once the number of fans exceeds a certain amount. It can also be thought of as a method of content distribution and may involve original copywriting upon request. KOL marketing plays an outstanding role through this channel. If you know how to select and conduct public relations with the right Chinese KOLs, you will be able to target at least 300,000 followers per KOL. Engagement rates will be decided by the KOL’s audience quality, level of influence, and content quality. You can select and buy We Media channels, and this is a Chinese reading only channel.
(Source: a We Media platform)
- Intermediary buyers:
Also known as daigou. These individuals conducting ‘daigou’ activities can grasp audiences’ psychology and position their needs to accurately launch the selling process without much hassle. 100% of people practicing this ‘daigou’ set-up utilize WeChat as an absolutely essential communication channel, whilst also using it as their shop-front. The marketing message cannot be long, as it is limited in length, and so requires powerful keywords. To regulate this powerful business and prevent tax abuses, more and more customs regulations are being published. Ymatou.com, a leading platform for daigou activity, has emphasized legality from day one. Launch-in-China Operations Consulting is also working to provide ‘daigou’ activity with a more structured and legally compliant environment.
3. More awareness of broader categories and controversial market mentality
It’s important to be aware of the wider Chinese e-commerce environment. Some mentalities may be difficult to understand for those that are unfamiliar. Chinese cross-border e-commerce platforms currently have very heavy homogenization. Every platform has milk powder and diapers triumphantly ooccupying the homepage. However, in reality, they are arousing within consumers a much bigger diversity in terms of categories and products and for a real ‘overseas products experience’.
What are the reasons for this homogeneity?
- Chinese e-tailers have difficulties getting official authorization from original brands and merchants for the supply of a wide range of their goods;
- Brands that aren’t market leaders can suffer as e-commerce platforms have to guarantee a certain period of exclusivity for the “big player” or compromise profit or payment terms. Another approach has been for top players to build stand-alone stores within these eclectic platforms. In a similar way, large retailers have started to develop their own e-commerce presence at the same time as having a flagship store on a third-party platform.
That may sound a bit contradictory, but that’s the current predicament for Chinese e-tailers. They want to take on new brands, but at the same time are wary. Often this attitude can act as a barrier to companies trying to break onto e-commerce platforms, with new products introduced often subject to strict conditions imposed by the e-commerce platform themselves. This phenomenon is very much a transition period before inbound cross-border e-commerce 2.0 emerges.
Why is this an opportunity? The market is not yet penetrated and saturated with new brands. It’s possible to catch the attention of consumers as long as you are utilizing the right platforms. What is the best solution? Find the right strategy and build up branding and sales through omnichannels. Finding the right partner to help you in the right way can be the key ingredient needed to achieve success.
I hope these 3 hidden keys can help you find your e-commerce omni-sales strategy in China.
Launch-in-China Operations Consulting provides a variety of services, with focus on fast moving consumer goods. We are currently offering a case study and free key point consultancy to European manufacturers interested in entering into, or expanding in, Chinese markets.
