(This article includes 2 parts: Part I: Background and things you might not know; and Part II: Engage the market in distinctive ways with a great partner.)
I spent 3 days in Beijing for the purpose of locating two founders of different Chinese top vertical e-commerce platforms; I successfully managed to, along with the face-to-face meetings, understand what exactly these top ones currently pursuit and perceive, concerning the market and the sourcing…
Part I: Background and things you might not know
When I was asked to tell stories over “e-commerce with China”, I pondered a moment over a chic story. It might not end up so fancy, but definitely interesting.
Let me first provide some “framework” stories before hitting the points:
There are seemingly stereotypes while by the end actually a necessary model to follow: Research – IP (legal support) – Strategic framework to determine your way of operations – Real or virtual locations according to special policies as added value – Budget – Online and offline alternation strategies – GREAT PARTNERS!
With a focus on e-commerce, you also have: Chinese e-commerce site – Local domain and local hosting — Chinese language customer service – Baidu SEO & SEA – Social media and other digital marketing –broad channel sales – Logistics.
Why “e-commerce” to sell in China?
Postal tax can be minimize to zero (postal tax is exempted if tax value is lower than 50RMB; and postal tax on FMCG are mostly 10%, the rest are 20%, 40% and 50% against different categories), as the Chinese government encourages cross-border e-commerce to prevent too much tax avoided. Besides, e-commerce has been naturally educated as a mainstream way of shopping in China for past 15 years. Last but not least, China’s needs of overseas goods are insatiable.
I’m sure you have been hearing about a lot of figures and facts, and here is a striking brief:
5000 Chinese cross-border e-commerce platforms are craved to source authentic products from overseas, at whose service 200,000 related business are occupied with; 650 million WeChat users already netted the biggest social media environment for you to propaganda; Chinese e-commerce GMV 2014 was 405 Billion USD in comparison with the entire European one of 424 Billion USD; Chinese residents’ overseas online purchase in 2014 were around 20 Billion USD; moreover it’s the most hyped news last week that, Alibaba has just smashed its own record for sales on China’s Singles Day, hitting 14.3 Billion USD.
To launch a new fashion brand, a Chinese business man would rather invest half million RMB on homepage advertisements on the 3 top platforms PER day, in order to race seizing the market. Thanks to this scenario nowadays in China, to a certain extent, Alibaba, who has 307 Million active annual users as they declared, achieves to rank his advertising revenue second only to Baidu (the Chinese dominant search engine which replaced Google in domestic market.)
Source: EnfoDesk
Here comes my next question: Among the numerous shops, how can you stand out while away from an over-expenditure?
One interesting story: One of my European clients sells international stamps, which is as rare as a European sells chicken feet in local supermarkets. One of the customers I found for him, a Chinese online retailer, pointed out 3 categories as animals, flowers and Disney, without hesitation, saying, I want them all. Then a 20K euro order was generated. I asked him, “what are they for? “, “As gifts.” He answered. It’s just one selected reputable online retailer under a niche category, with stores on 2 famous Chinese platforms.
We call this phenomenon in Chinese: Sao3 Huo4 (Sweeping the goods), which means clear up some categories of goods by one time purchasing in order to be exclusive. Of course some brands/products manufacturer may not like it.
So I always say that China is like an ocean, where you hurl into 2 containers of salt, and they dissolved in no time. However, strategy is crucial.
Another “unique feature” which you might not be able to find outside of China:
Let’s go back to the 11.11, Chinese Singles Day.
An anonymous user purchased 15 cars within the very first minute according to the most famous WeMedia** celebrity’s live tracking;
An anonymous user purchased 1000 Xiaomi mobile phones, which made Xiaomi all of a sudden break through 800 Million RMB GMV at 12th hour on the Singles Day – from same live tracking source;
Returning goods statistic on 11.11 was never published by Alibaba; Recently there is a scandal that Alibaba’s platform is under a shocking returning rate 2015. Even if the figures may exaggerate, what we can also learn from numerous local Chinese language reports and analysis is that, huge amount of low quality products are manufactured particularly for the singles day, which supports the appearance of high returning rates.
We call this phenomenon Shua1 Dan1 (Brush the sheet, meaning placing fake orders to raise the rate of accomplished deals). Following is how it works.
Source: Staff Reports
Clearly you do not want to use this competency in this unique market, and then I suggest you hold on starting with Tmall or JD stores, work on your own e-commerce site and digital marketing for your own identity, instead; until your brand recognition is high enough, then jump in the intensively high traffic but competitive platforms; unless you prefer to take a risk and spend a luxury infanthood.
Summary:
Jack Ma is absolutely one of my most respected Chinese revolutionaries. Even this genius, with the best intentions to create a commercial “beauty”, had to take on the risk of having it become a “beast” to attain success. And clearly, even if Alibaba’s e-commerce platforms don’t last for another 86 years, it won’t pale his priceless contribution to Chinese economy yet the e-commerce revolution to the whole world. As far as you are concerned, the tactic matters.
** WeMedia is referring to individual media center derived from the unique Chinese content market to adapt to the huge amount of social media and brand PR; it’s comparable with copy-writing freelancers with extra functionality as media launching; its huge amount of people in China work on this profession full time or part time.
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Part II: Engage the market in distinctive ways with a great partner
Now let’s talk about what kind of “great partner” you should look for and why they are crucial to help you sell in China through e-commerce.
Here we are focusing on non-classic approach of marketing and sales in China. They are not as visible as typical international working pattern, but they are repeated phenomenon in this unique market; more important, the effects were almost immediate.
Collaborating with the mainstream strategy, they make great value.
- Chinese language and nuanced cultural understanding (or someone can perfectly deploy staff to utilize these advantages): no it’s not cliché. These skills on resourceful level can quickly engage the sales within short time.
(1). Linkage with cross-border e-commerce platforms:
As an advantage in the bonded areas or free zone, it is relatively new but important to know that this facility best benefits on B2C e-commerce model for it’s very low postal tax, which is lower to 0 and with most goods at 10% the value.
There are at least 5000 cross-border e-commerce platforms throughout China; there are 14 bonded areas with various structures and regulations to accommodate related cross-border service business (around 200,000). It is crucial to find out which is well operated, what is the business model, who is related behind, and if they own the integrity instead of jeopardizing your brand’s benefit.
A lot of Chinese context reading is required for real important information on positive and negative sides. This is B2C market, so in principle it’s safe to be regarded as an efficient sales channel, on the terms that with whom we should work together with and how we shall proceed to keep the balance. This is B2B2C market, which can go great and fast; the bottle neck is that how to deploy a smooth and continuous sales path, since these Chinese e-commerce platforms always ask for “famous brands” and “exclusivity”.
So I would say that, a well-structured understanding and negotiation tactic is fundamental.
(2). Collaboration with Consignment Purchasers (also as intermediary buyers):
The population of overseas Chinese in Europe is counted in millions, and it’s said that at least 85% are performing as intermediary buyers in different levels.
These people dedicated to promote the goods that they consider popular or lucrative to Chinese domestic individuals. They distribute the procurement from food to cosmetics, baby stuff to luxury; as a matter of fact, you will be surprised what are not on their shopping list. They ship them by all the available logistic methods. And their buy-in price is mostly European retail price.
This manner is to the greatest extent guiding the trends in the Chinese overseas shopping society. (So by the way, do not rush yourself to systematically distribute offline in China yet, especially if you are representing food or cosmetics or luxury goods, because Chinese people really want those products literally OVERSEAS before they get them).
To locate the scaled and professionally operated business of Consignment Purchaser, you need special scouting skills in Chinese language in order to identify and classify them.
This is an alternative way to build up the early stage brand recognition. But it is also how it works in China. It’s more of a P2P/C2C market in a diverse route, so it doesn’t obviously influence your online global strategy. Especially it is already going on as a semi-main stream shopping phenomenon in China any way. My comment is, this alternative approach requires a sound management strategy and proper execution in order to lead the right way for distribution and brand reputation; meanwhile it asks for a lot of work on reading, understanding, discussion, analysis, fundamental sense, and decision-making, but it sells viral.
One thing you need to pay attention is that this phenomenon is already viral, but they are not all following legal procedures in terms of import (postal) tax. Making invoices from your side to facilitate these buyers and encourage them for clearance is an essential and wise action.
By the way, we call this phenomenon in Chinese Cao3 Gen1 Ce4 Lue4, which means weed roots strategy (or grass roots strategy).
(3). Engaging the industrial information and resources and applying adjustment even with nuance:
As a manufacturer, a wholesaler or even a trader, how many readers here fully understood the two points I was talking about above? –Since it is such a unique market scenario in China and few service business are able to fully comprehend and execute the operations.
Tons of resources and information popped up everyday through thousands of channels with news, opinions, new concept, disruptive models etc., which as you are receiving, spontaneously you’ve to be alert to some potential mistakes or traps. The real experienced and sensitive cross-continent marketers can even sense the nuance intuitively and then keep in tune accordingly.
2. Somebody truly understands e-commerce and digital marketing on both sides.
According to my 8 years e-commerce experience combined with wholesale and retail practice, I truly suggest you cooperate with those who could comprehend e-commerce knowledge of general aspects and more consequential, of broad distinctions between Chinese e-commerce and European e-commerce, owing to the fact that they are disparate in structure, operations, marketing, social media, and branding concept and customer behaviours.
You need to understand how to interpret the strategy from original brand concept into Chinese, and let them said by KOL (Key Opinion Leader), to form a great reveal and hype in even social media, and then make a seamless transition in order to deploy a perfect interpretation in the market. You need to position the most important message to deliver from your original brand essence, to what Chinese audiences really care to hear.
A simple example, a product page in Chinese e-commerce website can be scrolled down to literally 2 meters long with information from brand history, packaging, specifications, all-side close-up pictures, testimonial, case-study and at last to the delivery procedures. It does sound a bit too much work and chaotic. That is the typical style of Chinese e-commerce website, which was pointed out to be one of the reasons Amazon failed to beat Alibaba in China.
3. A partner next to you but connected close with Chinese market and regulations, more important, who can handle all the Chinese hurdles for you.
Another significant point is to have a partner by your side that with an entity preferably following the same legal regulation and protection as you are, however also regularly attached to your target market. This is not only to secure the liabilities, but also the efficiency of work.
The partner who works next to you most likely owns the same synergy with you and truly thinks for you, as well as deploys Chinese local approach to deliver contents and sales manner authentically in the Chinese local market.
And if you are lucky, this partner can profoundly optimize your operating time and costs by a most efficient service model based on bilateral collaborations.
Let’s have some examples over the hurdles:
One of a biggest challenges to run a website especially e-commerce website in China is probably the ICP license.
ICP is a permit issued by the Chinese Ministry of Industry and Information Technology to permit China-based websites to operate in China. And to acquire ICP license, you have to have certain entity in China, or, you are a Chinese-passport holder. ICP is really an exclusive Chinese government policy. Sites with ICP can be blocked anytime; sites without ICP can be fine indefinite. But if you stay far from China physically, the Great Firewall won’t allow your site being viewed very fast. Besides, when it concerns large consumption inside the country from your site, the tax office might eventually be interested talking to you.
And if you have e-commerce site, you cannot operate without AliPay as a dominant payment gateway. As long as you have ICP (which means you are already registered as a Chinese entity), the Alipay charge is 0.6%; while as a pure overseas merchant, you are asked to pay the charge of 2% (monthly transaction 10 million RMB) ~3%, or definitely higher with your local payment gateway providers.
So what can be the solution for the initial market entry? A Chinese domain hosted in Hongkong might be a common way to take into account (domain is not direct connected to ICP requirement; the host is), while it can raise a risk of minimum 20 days offline, for a new ICP application. Or the other option is you can hire a fluent Chinese speaker partner in the first place, to take all the hurdles and fix your entity, ICP and bank account in mainland China. And yes, a fluent Chinese speaker is a must to go through the complicated pure Chinese context and procedure online and offline.
Back to the topic of beginning of this article:
I spent 3 days in Beijing for the purpose of locating two founders of different Chinese top vertical e-commerce platforms; I successfully fulfilled my plan with the face-to-face meetings: one with Jumei.com (top 1 cosmetics vertical e-commerce platform, IPO within 4 years running, acquired a baby platform a short while ago);
and the other with Mia.com (top 1 overseas baby products vertical e-commerce special sale platform; very well-funded with Sequoia, currently just valued as 1 Billion USD within 1.5 year running).
I managed to meet up with them, due to my sense of the importance of social networking, relevant experience in context, broad cross-culture knowledge, and being confident I had an eloquent message to deliver. The most interesting part is that both of them shared the minds that, in China, it’s not enough to only “perform the right execution”, but the Omni-channel, including which the weed roots strategy is also definitely a practical method, like I elaborated.
This is also a great example to reveal why it is significant to have the right partner who is skillful and resourceful at managerial levels.
This “great partner”, thus, can also deploy all the “frameworks” I mentioned in the very beginning of the article, so that she/he can determine an integral strategy as well as deploying concrete operations for you, on a base of fund use efficiency.
This is also a great example to reveal why it is significant to have the right partner who is skillful and resourceful at managerial levels.
Tingting
