"In other countries, e-commerce is a way to shop, but in China it is a lifestyle" Jack Ma
E-commerce is rapidly increasing in China and currently accounts for around 10.6% of all retail sales. There are over 632 million internet users in China, of whom 47% are online shoppers, which is hovering slightly below the entire population of the U.S!
E-commerce sales in China totaled $449.12 billion in 2014, up 49.3% from $300.74 billion in 2013, according to the Chinese government’s National Bureau of Statistics (CNBS). In comparison, web sales in the U.S. totaled $304.91 billion in 2014, up 15.4% from 2013, according to Department of Commerce estimates (Feb. 2015). China’s e-commerce market is growing more than three times faster than that of the U.S.
Although the official average income of the Chinese online shopper is much less than their American counterparts, personal income of the Chinese middle-class grew by 10% (CNBS).
Chinese research firm iResearch forecasts that China’s e-Commerce market will grow at a 27% rate over the next four years.
To put all of these fun statistics in a simple and cohesive thought, the sheer size of the e-Commerce market in China is an enticing challenge. U.S. Companies, however, need to be armed with the knowledge base, strong partnerships, and realistic expectation in order to make their China e-Commerce strategy a profitable and viable long-term proposition.
The China e-Commerce Team has encapsulated this all in a robust and diverse strategy that will serve to enhance the U.S. Company’s foray into China’s e-Commerce channel.
The e-commerce team has created a challenging and unique array of offerings in order to “Dare to Be Great”. We will utilize our unique position to engage the e-Commerce strategic business partners, the FTZ officials, our USEAC support and our wealth of information to provide U.S. companies an unparalleled ability to understand the unique opportunities and challenges in developing their e-Commerce strategy.
How do B2C, B2B interactions work in your country?
The internet has “revolutionized” how businesses sell to each other and to clients. Alibaba, whose mission of empowering smaller vendors and customers with transparency and escrow payments has changed the way China does business. B2B was particularly hampered by post-socialist, traditional modes of patronage and kickbacks.
It’s interesting to note that over 70% of China’s $1.6 trillion in total e-commerce tractions for 2014 was B2B.
There are many strong players in the B2B space, with Alibaba having a commanding lead. Other companies are dhgate, Jin Chuan Wang, Global Source
As for B2C, online totaled 10% of China’s total retail for 2014.
What e-commerce sites do people use?
Alibaba is the emperor of China e-commerce, accounting for 50% of online B2C with its Tmall platforms, and more than 90% of C2C on Taobao. JD is the chief rival, depending on better logistics and a reputation for authenticity to secure its 25%. There are other big players – NASDAQ stalwart DangDang, Walmart-invested Yihaodian. But they and even China’s Amazon operation have less than 3% market share.
What are the online purchasing trends?
Authenticity and diversity of goods have become the two biggest pain points for online consumers, leading to major growth in China’s cross border e-commerce industry, whose import value was roughly $161m for 2014, driven by some 18m Chinese shoppers.
The importance of mobility as a driver of shopping experienced can’t be understated, as more than 80% of Chinese use mobile devices as their primary means for accessing the Internet. Also, more and more e-commerce sites that specialize in segments such as imported food, baby products, and independent designer brands are growing fast and getting funded by serious venture capital. Such sites are not necessarily eating in to Alibaba’s market share, though, as the high YOY growth of the industry as a whole means many ships can rise with the tide.
What are the social media sites people use?
WeChat gets most of the press, since former champion Weibo began hemorrhaging active users in 2013, further to its integration with Alibaba’s Taobao, and subsequent transition to a much more commercialized experience.
WeChat is a mobile app that provides much more intimacy than Weibo did, as well as voice messaging and other ad value features. It’s quickly grown to approximately half a billion users. As a result, parent company Tencent has made in-app stores possible, and integrated with Alibaba rival JD.com.
Tencent is now concentrating on in-stream targeted ads, Facebook style and the app’s main e-commerce value will most likely be in O2O uses.
Tencent’s QQ application, the predecessor of WeChat, has over 700m users, and is most Chinese people’s IM application, preferred over email and phone for a wide variety of communications.
Where are digital ads placed? What are the consumer preferences? What works?
Digital ads can be placed in all the verticals available in the west such as e-commerce sites, focused portals, search engines, blogs, BBS and forums. Placing them programmatically is a problem, however, given China’s strict licensing rules for advertisers
But as to what works best, in terms of conversion, efficiency, and scalability, one of the strategy companies that we work closely with says, “ it is hard to beat search engine advertising.” Although typically less than 1% of people who view the ad click on it, those who do so have prequalified themselves as serious prospects. The low bid prices and easy testing parameters further distinguish SEM as a go-to tactic.
What are the data gathering and usage restrictions?
There is a regulation in China called “China Internet Management Policy” that in “China Style” is quite ambiguous and opaque. In practice, the Chinese government and apply their definition of the regulation in a manner that suits them.
Examples of different ways your CS staff provides services and e-marketing.
Create and/or participate in a series of programs with U.S. Companies that result in actionable and viable solutions.
- Annual China Market Entry and Acceleration Roadshow (MEAR) (Multiple Cities) November 2015
- Participation in Discover Global Markets Dallas, TX eCommerce(OCT 2015)
- Participation in Discover Global Markets Irvine, CA Retail and eCommerce
- Newsletter Development
- Virtual Product Pitch or Informational Sessions to build client knowledge and partnerships.
- Video eCommerce in China
- Create eCommerce section on export.gov
- U.S. Buying Mission
- Sister City eCommerce Zones
- Natural Product’s West Trade Show
What are IPR considerations?
A robust and safe e-commerce environment is crucial to the success of Chinese and U.S. e-commerce companies and protection of online consumers. Online infringement is a threat to a healthy online environment and the No. 1 concern for the U.S. consumer goods industry in China. Most U.S. companies tell us that they are not the No. 1 seller of their products online.
A majority of the products sold under their brand online is fake goods sold by another company. In some cases, more than 80% of a “hot” product sold online is counterfeit. Consumers are also duped into believing that they are buying authentic product online and have limited means of seeking redress for buying fake goods.
The biggest e-commerce company in the world, Alibaba, is located in Hangzhou, Zhejiang Province, which is part of the Shanghai Consular district. Alibaba and some of the other big Chinese e-commerce platforms have been making efforts to fight online counterfeiting. However, in terms of the notice and take-down procedures, evidence thresholds and efficiency, they need to do much more. Rights holders must be diligent in combating infringement through civil litigation, cooperation with government agencies, and earnest negotiations with the e-commerce platforms themselves. Above all, rights holders must make sure that before they begin to use China’s e-commerce platforms to sell product, they first register their trademarks, copyrights and patents in China.
What Regulations and Initiatives does the host country have regarding e-commerce?
The government has taken a very public stance in promoting e-commerce, with foreign trade zone (FTZ) initiatives to stimulate development of the industry, as well as working to streamline regulations to govern transactions in support of the consumer. Currently, many of the regulations regarding e-Commerce are being developed and the actual practice of what is allowed is not only different in various locations, but also is likely to change in the upcoming years. Hence, companies looking to sell via the e-Commerce channel in China need to be flexible with their short and long term strategies.
What products are prohibited and have export barriers?
Please reference bos.doc.gov and US ITAR to see restricted items into China.
Certain items such a cosmetics, food items, nutritional supplements, etc. may need special China Inspection and Quarantine (CIQ) testing.
What are the products for services: tourism, education, financial services, planning, engineering & architecture etc.?
China, like the U.S. has online accessibility and sites that specific cater towards tourism, education and financial services.
List of fulfillment centers.
No specific list. Dependent upon the importation method into China, the partner and the selling method.
What are the most popular online payment mechanisms?
Market Share of Third-party Online Payment Platforms by Transaction Value
In Q3 2014, Alipay accounted for 49.2% in China’s third-party online payment market, followed by TenPay (19.4%), Unionpay Merchants Services (11.6%) and 99Bill (6.9%).
| ||Q3 2013||Q4 2013||Q1 2014||Q2 2014||Q3 2014|
|Unionpay Merchants Services||11.7%||12.0%||11.09%||11.4%||11.6%|
|International Payment Solutions ("iPS")||2.9%||2.8%||2.7%||2.7%||2.7%|
Mobile payments in China is becoming more popular. Alipay ranks on top accounting for almost 83% of the total transaction value, followed by Tenpay and Lakala according to iResearch data.
Market Share of China Third-party Mobile Payment Providers by
Total Transaction Value in Q3 2014
What is the de minimus value threshold for low value purchases? NONE
What important holidays or special national promotions drive online purchases?
China’s Singles Day, November 11th, is easily the world’s largest e-commerce sales day, topping over $9 billion in 2014. Ironically, while the news is among the few spun positively by western media regarding Chinese e-commerce, the reality is that deep discounts on popular products are the rule of the day, even enforced by sites such as Alibaba.
Therefore, Singles Day selling is about brand boosting, rather than profit.
Contrary to what one might expect, Lunar New Year does not drive huge e-commerce numbers, as fulfillment is slowed by low delivery availability.
How many consumers and businesses engage in cross border e-commerce?
2014 saw some 18 billion Chinese consumers purchase an estimated $161M of foreign goods. There are upwards of 2000 Chinese enterprises focused on cross border e-commerce, but only a handful are realizing significant volume, Tmall Global, USA Shop, and a few others.
What percentage of consumers make e–commerce purchases on their cell phones?
Chinese consumers spent close to $150M on their smartphones and tablets in 2014, up 239% from 2013, according to Chinese research firm iResearch. The primacy of mobile over desktop in China cannot be overstated, nor can the potential for O2O (online to offline) associated shopping.
Do you have an e-commerce success story you can share? Ongoing
What are the taxes for online purchases?
There are import duties, dependent upon the product categories. If sold to China through the traditional channels (B2B) also will need to pay VAT.
Can English be used initially in your market?
No. While leaving some English in one’s service wrapper helps convey a sense of international quality, and confirms the foreign provenance of the brand, Mandarin must be employed for 99% of the marketing copy. It’s important to remember that good translations will not only be accurate but impactful sales copy, something most bonded translation agencies do not have in their wheelhouse.
What kinds of online promotions/discounts on actual e-commerce sites are effective (different from digital ads)?
Group buying and flash sales are the most commonly used promotions on Chinese e-commerce sites. However, these are generally employed for products with highly recognizable, competitive brands, or those for offline use, such as restaurants and movie tickets. Holiday promotions, including Christmas and Valentine’s Day, are also very common.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.