Over 80% of surveyed U.S. and foreign retailers see China as a lucrative market, as affluent Chinese consumers seek quality products from overseas. However, only 20% of retailers feel confident in their capability to succeed in China’s e-commerce market, according to The Cross-border eCommerce (Haitao) Opportunity in China, a new report by consulting firm Frost & Sullivan, in partnership with China retail strategy expert Azoya Consulting.
Top 3 countries preferred by Chinese online shoppers are Japan (72%), South Korea (60%), and the U.S. (55%).
The survey focused on mid-size and large retailers with annual revenue of over US$50 million; 36% of the retailers earn annual sales of more than US$1 billion.
“This is the first report globally to review the Chinese cross-border e-commerce market from both consumer and retailer perspectives,” says Mark Dougan, consulting director, Asia-Pacific, Frost & Sullivan. “By understanding consumers’ behavior and needs, and retailers’ current situation, the report provides new insights and strategy guidance for international retailers who want to succeed in the online shopping market in China.”
On track to exceed US$1 trillion in online sales
With 500 million online shoppers, China is on track to exceed US$1 trillion in online sales this year. In recent years, China has experienced a 40% annual growth rate in the value online shopping. The report’s key takeaways include:
- Why Chinese shop cross-border: To access higher quality, trusted products (67% of online shoppers) and lower the risk of counterfeits (45%)
- Top categories: Fashion (bought by 22% of online shoppers), beauty and cosmetics (20%) and mom and baby (15%)
- Preferred country of origin: Chinese online shoppers prefer to buy from companies in Japan (72%), South Korea (60%), the U.S. (55%), Australia (37%), France and Germany (both 26%) and the UK (23%)
- Gender differences: Women spend US$976 on average per year, 20% more than men. Men seek fast delivery; women seek Chinese language customer support, and relevant content on the supplier’s website. Women are more likely to use an overseas supplier’s standalone direct-to-consumer website (21% vs. 18% of men).
Approaching customers through multiple touchpoints
Factors influencing cross-border purchases include Chinese consumers’ expectations of a range of payment options and efficient website performance for a seamless customer experience.
Among retailers, only 37% currently feel satisfied with their online sales in China using a global e-commerce vendor, 31% feel satisfied with their standalone online store and 21% feel satisfied with sales through online marketplaces, such as those owned by Chinese giants Alibaba and JD.com. Marketplaces’ crowding, intense price competition, margin-eroding commissions and high upfront costs have led more foreign retailers to create standalone Chinese websites to gain direct customer access, greater control and higher net margins.
As a result, retailers are looking beyond marketplaces as their only approach to consider, especially if these companies have a long-term sales strategy in China.
“To build a brand that Chinese consumers trust, which commands a healthy profit margin and repeat buyers, retailers need to approach customers through multiple touchpoints,” says Don Zhao, co-founder of Azoya International. “The key channel should be within retailers’ control, accompanied by supplementary platforms.”
More and more retailers are establishing standalone websites as the core of their strategies, as these sites directly connect retailers with Chinese consumers who desire foreign brands, while empowering retailers with flexibility and control over their business, Zhao adds.
To succeed in China, the report suggests international retailers should focus on basic e-commerce capabilities, including efficient digital marketing, local logistics networks, a range of payment options, Chinese language customer service and content. In addition, retailers need a robust social media strategy, including partnerships with influencers or key opinion leaders (KOLs), and understanding market trends to reach and engage Chinese consumers.