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How to get started in the Chinese market

 

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The massive Chinese market can be daunting for foreign retailers. Setting up, growing your brand and getting your head around the lack of popular marketing platforms including Google, Facebook, Twitter and Instagram makes it a challenging prospect. But for retailers that put in the effort, it can also be extremely lucrative.

According to deputy managing director of Australia for Azoya, Sylvia Wei, despite the challenges 2017 is the perfect time for local retailers to look into the Chinese online shopping market.

“China is the fastest growing ecommerce market in the world,” said Wei. “In China online shopping is really popular, especially among the growing middle class. In fact 60 per cent of Chinese consumers shop online.

“Even a small slice of China’s market will be really big for Australian retailers.”

The market

The Chinese ecommerce market has exploded in recent years, largely due to a government regulation introduced in 2014 that permitted cross-border shopping for the first time. This presented massive opportunities for Australian retailers to target China’s expanding middle class, who are increasingly seeking out Western-made products.

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Since then, many foreign retailers have entered the market. “Over time these retailers have built experience and operations in the market,” said Wei. “This means China is not a whole new market and retailers coming in can learn from others.”

In 2016, Chinese government introduced new tax policies and regulations aimed at making B2C ecommerce and B2B2C bulk trade a more level playing field. This had an immediate impact, with the total volume of cross-border ecommerce transactions dropping by almost half since it took effect in April 2016.

Looking towards 2017, policies will continue to be fine-tuned, especially the ‘positive list’, which currently allows popular foreign products to be imported via China’s free trade zone. The Ministry of Commerce of the Government of China (MOF) recently announced that this tax policy will be postponed until the end of 2017.

“These new tax regulations shouldn’t discourage prospective Australian retailers,” explained Wei. “The Chinese ecommerce market is entering a more stable period in 2017 that will benefit both the vendor and consumer.”

How to get started

Selling through a marketplace is the most common way for international retailers to break into the Chinese market. Tmall Global, Alibaba’s shopping platform for overseas sellers, is the largest and has a huge audience.

“When you set up a store on a marketplace you have access to a big customer base and can start selling your products online,” said Wei. “However, a stall on Tmall has related costs you need to look into, like marketing expenses and promotional costs.

“The other way to enter the Chinese ecommerce market is to have a standalone site. More and more retailers are beginning to do this, like US luxury accessories retailer Coach.”

Other retailers, including Australian brand Amcal, have launched their own Chinese sites rather than using existing ecommerce platforms. This gives them greater control over sales and the merchandising of their ranges.

“Amcal can establish an ecommerce site because they are one of the biggest pharmacy chains in Australia—tourists are probably already familiar with the brand,” said Wei.

The Aussie edge

By mid-2015, almost 50 Australian brands were selling directly to Chinese consumers through marketplaces, and an additional 78 were sold through authorised online resellers. Since then, many more have entered the market including Woolworths, Adore Beauty and Chemist Warehouse.

During Alibaba’s Singles Day shopping event in November 2016, Australia was ranked the fourth highest selling country behind Japan, the US and South Korea. Chemist Warehouse was the star of the show, reaching $1.9 million worth of sales in 13 minutes.

“Australian products have a reputation for being best quality,” said Wei. “At the moment it’s still baby and mum products, skincare, health care and supplements that are popular with online shoppers.

“Apparel is a popular category as well, but it is focused on middle to high end products because when consumers shop cross-border they are looking for luxury brands.”

Selling on social

Social channels have become very popular for retailers wanting to establish a store, said Wei. WeChat is the most popular messaging app in China and boasts 700 million users, with 94 per cent logging in every day. The app has developed into an all-encompassing browser for mobile sites and retailers from banks to fashion brands are opening official accounts.

“Retailers that have established well in the Chinese online shopper community have a better chance,” Wei explained. “As a newcomer you are looking to build your brand through platforms like WeChat.”

Not convinced about social media’s power? During Black Friday sales last year, Australia’s Pharmacy Online ran a promotion through WeChat that resulted in online payments through WeChat Pay accounting for 12 per cent of sales.

Weibo, the Chinese equivalent of Twitter, is another social platform with selling power. The microblogging site grew by a third in 2016 and now has nearly three million users.

Keep it local

According to Wei, it is extremely important to have local knowledge if you are interested in entering the Chinese market. “With a population of nearly 1.4 billion, there is huge disparity in each of China’s 34 regions, with numerous factors such as household income, language, education, culture and logistics influencing purchasing habits,” she said.

“For Australian retailers, it’s about finding the right market for your products. Good planning and strategy is important, but dealing with the practicalities of delivering that strategy is often complex. Local knowledge is everything.”

This means deciding on the best regions or cities for your products, and understanding local channels to do search engine optimisation and social media marketing.

“Even though the market seems very lucrative to retailers, the size of the market means there is a lot of competition. Everyone is trying to stand out. It’s a chaotic market—if you try to crack it on your own it will take a long time.”

 

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