Sell online in China Report
A collective approach can help to spread costs and reach more customers. Interest groups such as the US pork lobby USMEF, and governments of countries such as France, Italy and the United Kingdom have already launched successful e-commerce promotions for their companies, in cooperation with large platforms. South Korea already even has a national pavilion on T-mall and JD. Such initiatives are an interesting example for foreign companies to come in China market. Therefore we conclude this opportunity report.
China is the largest e-commerce market in the world. Chinese online consumers in 2014 spent 345 billion USD shopping online, China’s gross merchandise volume (GMV) in e-commerce has gone up from little over 7 billion USD in 2007 to almost 425 billion USD in 2014, as depicted in Online Retail Graph. The share of e-commerce in China’s total retail has risen above 10% in the first quarter of 2015 – a remarkably higher percentage than in the US – and this will grow to 13.6% in 2016. Despite doubts whether e-commerce can spread to less developed areas in the country with equal speed, for now China is still one of the most attractive online retail markets.
There is enough space for the Chinese e-commerce market to keep growing in the coming years. Namely China has a much lower percentage of total internet users who shop online than for instance the US, UK and Germany. And the number of internet users in China is also still growing.
Mobile and Social
China is shopping increasingly mobile. In 2014 the value of mobile purchases, so-called m-commerce, increased with 293% compared to 2013. With a value of approximately 130 billion USD, mobile transactions accounted for about 30% of total Chinese e-commerce. As displayed in Percentage of Mobile Purchase Graph, the share of mobile commerce is estimated to rise to 53% in 2016. Remarkably, in the Chinese countryside already 64% of online consumers shop via mobile devices – and e-commerce in rural areas has a high volume potential for growth.
The jump in mobile shopping is not surprising, as figures tell us more than 390 million smartphones were sold in China in 2014. This is 32% of the worldwide sales of smartphones, and this trend is still growing. Many in the countryside skip PCs as a tool for internet access, relying almost solely on their smartphone. Social media also play an important role in the rise of m-commerce.
In the first quarter of 2015, there were about 440 million active users of Tencent’s mobile instant messaging application WeChat, which has in recent years grown to become the most important social platform. With corporate WeChat accounts, customer service can be provided, and promotions are done in ever more innovative ways. Since recently, even direct sales are possible, through the so-called WeChat Store.
Chinese online consumers find their way to foreign products through various channels. For a while, there has been a lively trade on c2c platforms in overseas products, which purchasing agents acquire from abroad without paying import taxes (or which are counterfeits from China). At the moment, official b2c channels are becoming more popular for buying overseas products, which are either mailed directly from abroad or from bonded warehousing in China.
In 2013, 18 million Chinese consumers bought overseas products online, with a total value of approximately 35 billion USD. As such overseas product purchases were equal to 11% of domestic Chinese e-commerce, and this ratio has according to estimates stayed stable. Thus cross-border e-commerce grows along with the rest of the Chinese online market.
Cross -Border Sales Channels
Foreign products find their way to China often yet not via official b2c channels. If Chinese consumers do not buy the desired products abroad by themselves or through friends, they often call in purchasing agents, who also sell through c2c platforms such as Taobao. Namely, the grey channels through which many overseas products enter China, do not pass customs inspections, and no import duty is paid. Import procedures are often a hassle and duties can go as high as 50% of the product value, which can make alternative channels very lucrative. With the current development of cross-border e-commerce, however, official channels are quickly replacing purchasing agents. First, almost all large e-commerce platforms currently have a b2c segment for overseas products. Overseas products displayed on b2c platforms, are sent to the customer directly from abroad or from bonded warehousing in China. Since merchants on these platforms have to be established and authorized abroad, they are considered more trustworthy. Customers are willing to pay a bit more for that. Moreover import procedures and tariffs for postal items have been relaxed somewhat, and the government promises to take more steps on the short term.
New Policies, New Opportunities
E-commerce is a topic with high priority on the Chinese policy agenda. Over a short period many new rules have been made to facilitate the development of the market, such as the right for consumers to return products under certain conditions. One of the most important result areas is the regulation of foreign trade flows, by promoting official cross-border e-commerce. As such cross-border e-commerce is also connected to China’s “One Belt, One Road” foreign policy. Special Cross-Border E-Commerce Zones have been established in a growing number of cities. Cross-border e-commerce is also a focal industry in the national Free Trade Zones in Shanghai, Fujian and Guangdong.