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5 Must-knows about Online Retail in China

Release Date

18 February 2014

According to Forrester’s Asia Pacific Online Retail Forecast, 2013 to 2018, E-commerce spending in China is forecast to grow from US$294 billion in 2013 to $672 billion in 2018, overtaking the Unites States as the world’s largest online retail market. While cashed-up Chinese consumers are becoming more sophisticated to compare and shop quality consumer goods online, more and more foreign companies are leveraging this opportunity to grow their retail market share in China by joining or setting up their own online stores. A recent example is Apple who has just set up its first China online flagship store on Tmall.
 
Here are 5 must-knows for companies looking at the China’s online retail market:
 
  1. Online retail model: Companies have 3 major options to retail online: A) a single brand flagship store: the company may either own and manage the store itself or commission a third party to manage the store; B) sell on a multi-brand store specialising in a country or product category: the multi-brand store is usually owned and managed by a third party/consolidator; C)  sell to an online retail portal who works like a distributor plus retailer.  Option C is the easiest model for foreign companies while option A provides the best control by the brand owner. Businesses need to look at their resources and capabilities for the selection of optimal online retail model.
     
  2. Major retail platforms: In China, the number 1 online B2C platform is Tmall  while C2C is monopolised by Taobao. Both platforms are owned by Jack Ma’s Alibaba Group. These 2 platforms are the best-to-go if companies choose Option A or Option B above. While 360buy is the major online shopping centre for
    Option C.
     
  3. Online payment: Alipay in China is as popular as PayPal in major western countries. Chinese online consumers usually pay through their Alipay account, or credit cards issued by Chinese banks, or cash upon receiving goods. Western credit cards are not widely accepted by online retail platforms. To facilitate Chinese consumers’ transaction, a local account and an Alipay account are must-haves.
     
  4. Logistic: Chinese consumers are not patient with long-term delivery. An efficient and capable logistics service provider will win you repeated sales. Local logistic firms such as Shunfeng, Shentong have outperformed international chains  including DHL, UPS and TNT.
     
  5. Marketing: To choose reliable online sellers, Chinese consumers tend to search by using the “popularity” and “total sales” ranks on online retail platforms. Such rankings are  mostly boosted by aggressive online marketing and word of mouth. Chinese consumers are also passionate in posting reviews on the products they buy online. Online reviews are the major driver to convert visits to sales. Hence online maintenance is a key success factor to pull Chinese online buyers . A dedicated “live online” customer service and marketing team will put you ahead of thousands of small players in a huge online platform such as Taobao.
 
Managing an online store overseas in another language is a challenging task for most businesses.  The key success factor is to work with a genuine, capable and committed service provider. While the traditional retail outlets are shrinking,  online retail channel is a fast-growing and  more direct channel for businesses to reach the Chinese market through strong partnership.

This article is contributed by Sara Cheng, Manager-Greater China Region, Australian Business Consulting and Solutions. If you require any assistance or services in regard to online  retail in China, please contact Sara at sara.cheng@australianbusiness.com.au or call 02 9458 7341.

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