How to navigate China’s cross-border retail markets

Cross border retail

China is the world’s largest, fastest-growing and most discussed e-commerce market. Online sales were predicted to hit USD 899 billion in 2016, or 47% of the global total – and brands and retailers are gearing up for the next phase of growth.

The eye-popping figures are driven by homegrown online marketplaces, such as Taobao, Tmall, JD.com (which also owns the Yihaodian site) and Suning – offering vast ranges of local and imported products. To enhance the shopping experience, China’s leading online players offer secure digital payments, regular discount promotions and high-speed home delivery.

With international brands in high demand, cross-border e-commerce is a hot topic. Chinese cross-border buying is projected to more than double from USD 57.13 billion in 2015 to USD 129.06 in 2018 – but the evolving digital landscape means brands may encounter a new layer of operational complexity. Here are five reasons why:

Just two years ago, at the start of the upward curve, Chinese online marketplaces were eager to sign as many international brands as possible to offer diverse product ranges that consumers could purchase at home, on the train or at their desk. Today, China’s leading marketplaces are saturated. Tmall, for example, has become stricter in accepting new applications from brands to sell through its web platform.

In April 2016, China announced new import tax rules for products purchased online from an overseas source. New registration requirements for certain medical, health and cosmetic product categories will also come into force in May 2017. Ten pilot e-commerce cities in China – Shanghai, Hangzhou, Ningbo, Zhengzhou, Guangzhou, Shenzhen, Chongqing, Tianjin, Fuzhou and Pingtan – are exempted from the new tax regulations until May 11 2017. Brands and e-tailers in China are expecting new e-commerce regulations to be announced in 2017.

China’s “grey market” provides myriad challenges, both in terms of lost sales and brand reputation. Having thrived offline for many years, counterfeit and copycat branded products often find their way onto e-commerce platforms. Meanwhile, “parallel importing” – whereby genuine products are imported from alternative sources and sold at discounted prices – is rampant across many consumer segments, from cars to watches to vitamin supplements.

Luxury brands are also being challenged by daigou buying, whereby personal shoppers select, purchase and ship products to order for clients from the world’s leading retail cities. For discerning brand mavens, this delivers the cachet and lower prices of overseas purchasing without having to travel – or even click online.

Offering global products for sale in China is no longer the sole objective of its largest marketplace sites – which are escalating their presence across Asia. Tmall Global launched Tmall.hk, enabling international brands to sell online to consumers in Hong Kong, and on November 11, 2016 introduced its vastly popular Singles’ Day online cybersale for Hong Kong consumers.

In South East Asia, Tmall’s parent company, Alibaba, purchased Lazada and RedMart and invested in SingPost, and JD.com’s venture in Indonesia presages further regional expansions. In future, these integrated e-commerce platforms plan to offer global and Chinese branded products to consumers in China, Asia and beyond.

China’s cross-border influence is gaining momentum in emerging Asian markets, and brand strategy goals are realigning. Digital and retail teams are working together to develop and integrate their knowledge of unique consumer preferences, pricing and payment methods, product and packaging requirements in each market.

In 2016, working with Shanghai Sweets International (eSweets), DKSH – a leading Market expansion Services providers – created and managed a Lindt-branded online flagship store on the Tmall Global marketplace. The exclusive Lindt chocolates were not otherwise available in China, providing a clear differentiator for online consumers seeking new experiences. The Tmall store generated impressive sales – and created extra online and offline exposure for Lindt – a premium Swiss confectionery brand with a reputation for excellence. In a brand-conscious country like China, the strength of a marque can be influential in building both online sales and word-of-mouth advocacy – which is a potent marketing tool.

The success of the Lindt Tmall store underlines the value of choosing a partner that understands China’s shifting e-commerce landscape from a local perspective. This diverse experience in China combined with an intimate knowledge of Asian markets helps our partners to target and engage consumers – and drive sales as the China-driven realignment of online shopping continues apace in Asia.

Sources

eMarketer - Worldwide Retail Ecommerce Sales Will Reach $1.915 Trillion This Year
Nielsen - China's e-commerce market: untapped potential for global companies
South China Morning Post - Hong Kong braces for the world’s largest online shopping spree on November 11