JGOO’s Exclusive Tips on How to Enter the Chinese Market
The size and scope of China undoubtedly makes it a daunting market to enter and…
By Pippa Horn
Jack Ma, the founder of the Alibaba group, put it in pretty simple terms when he said that “in other countries, ecommerce is a way of shopping. In China, it’s a way of life”. Unsurprisingly, China has once again soared ahead to become the world’s first trillion-dollar e-commerce market, and the global leader in online retail sales with an expected market value of $2 trillion by 2022. Rather more surprising is the fact that most Western brands simply aren’t exploiting this opportunity.
Despite growing at a compound annual rate of 8.5% through to 2022, there is still plenty of room for growth with just over a third of China’s population shopping online. Interestingly, research has also revealed a strong interest and expenditure amongst Chinese consumers in buying online from overseas retailers, with an average online shopper in China spending almost US$850 per year on cross border purchases. Chinese consumers are motivated by the perceived higher quality and lower risk of buying fake goods that overseas retailers such as those in the UK can offer.
So why are Western brands consumed by reluctance when it comes to pursuing a China e-commerce strategy? Given the popularity of British brands among Chinese consumers, UK brands in particular should be jumping at the opportunity to tap into China’s digital generation. Here are three reasons why selling cross border to China through your e-commerce platform should be at the top of your priorities:
1) Market size
Buoyed by local tech titans Alibaba and JD.com, China has once again leapfrogged the rest of the world in creating an e-commerce market that is set to grow to double the size of the US market within 3 years. Today, China makes up 56% of all global e-commerce sales, a figure that is set to exceed 63% by 2022 – the market is quite simply incomparable to any other.
By next year, estimates predict that more than half of China’s digital buyers (a quarter of the Chinese population) will be shopping for cross border products, either directly on foreign based websites or through third party e-destinations. But China’s gen Z doesn’t shop online the traditional way – many look beyond traditional e-commerce platforms and use messaging, short videos, live streaming and social media apps such as WeChat as gateways to make their purchases. More than $413 billion of goods will be sold through social e-commerce in China by 2022, and this new era in Chinese shopping offers a glimpse into the likely future of retail around the world.
2) Increased wealth and spending power in China
Not least do they have the largest proportion of online retail buyers, but they also boost a population that spends extortionate amounts of money over the web. With Chinese spending power increasing year on year, the market presents an attractive opportunity for Western brands to grow their customer base and target these remotely.
In recent years, consumers in China have benefited from rising incomes, catapulting millions into the new middle class – which by 2030, is set to make up for two thirds of the entire population. The result has been a marked rise in purchasing power and average spending per person.
With rising incomes and enhanced convenience of shopping online, consumers have become increasingly aware of the quality of products, making imported consumer goods with guaranteed quality and authenticity one of their top priorities. Thus, there now stands a market for online retailers to woo these millions of affluent consumers with a diversified range of personalized high quality goods manufactured overseas and sold cross border.
3) Digitally savvy consumers
Chinese Millennials are undoubtedly the most digitally active group of consumers in the world. Representing almost a third of China’s population, millennials account for more than 400 million people (a figure which is more than the combined working population of the US and Western Europe).
Digital buyer penetration will reach 65.5% of internet users, a staggering 453 million people, and it is estimated that over a third of these will be between 25-34 years old. A further 20% of online shoppers will be aged between 18 and 24 years old. Combined, this means that those between 18-34 will account for over half of China’s online shoppers – a generation that is predicted to dominate the market for the foreseeable future and one that Western brands should tap into sooner rather than later.
Further research shows that 19 – 24 year olds rank highest amongst those making cross border purchases from China. Understanding the aspirations of China’s digital generation is key to succeeding in China. The manner in which they pay, and the distribution channels via which they purchase have brought a multitude of changes to the market. They’re digitally driven, they prefer to shop online and they use social platforms such as WeChat and Alipay as gateways to make purchases.
The answer is simple: Western brands must embrace the growing consumption trend amid the rise of the younger generation and cater to their changing digital preferences. E-commerce has now become We-commerce.