1.63 Billion USD in 38 minutes.
This is how much China’s consumers spent online on Singles Day (November 11th) in 2014 – the Chinese equivalent of Cyber Monday. Total sales for the day added up to 9.3 Billion USD, up from 5.6 Billion USD in 2013. Considering the total US eCommerce spending is hovering around 300 Billion USD, these numbers are certainly mind-boggling and signal a strong opportunity for American Brands and Merchants to consider selling to the consumer in China.
While companies like Alibaba, with their TMall Global offering are attempting to make global trade a reality by lowering barriers to entry, there are still many considerations to navigate before diving in.
On Feb 12, 2015, I had the opportunity to represent Indix on a panel discussion organized by the Washington State China Relations Council. Speakers included Alibaba Group’s Head of Cross Border Trade, and VP & GM of China Operations for Pacific Coast Feather, an American Brand already selling on Alibaba’s TMall Global platform. Below are 5 takeaways we wanted to share from this session.
1. In China, online shopping is more prevalent on mobile devices and growing faster than on desktop computers.
China has the world’s largest mobile internet user base with over 527 million active users, and over 50% of online shopping payments originated from mobile devices in 2014. When attempting to crack the Chinese ecommerce market, having a “mobile first” strategy with your store, marketing and payments platform is crucial.
2. China’s consumers view online shopping as a social activity and a form of entertainment.
This requires promoting experiences and a way of life through story-telling, engaging visuals and transporting the buyer into a world that he or she desires to occupy. Unlike western consumers who typically shop online in the privacy of their homes, the Chinese consumer can be found shopping while at dinner with friends, often seeking their opinion on the products and prices. Product category pages titled “California Girl” and “Seattle Living” are regularly used to help consumers find products and styles representative of places they love. We view this as a confluence of Customer Intelligence and Product Intelligence.
3. Clothing, Shoes & Accessories, Baby, Health & Beauty and Packaged Agricultural products are the most desired categories.
High-quality, western brands in these categories have consistently ranked as the highest selling in the Chinese market over the last 3 years. While the appeal of western fashion and baby product brands may be obvious, the popularity of the agricultural product category is a recent discovery. For example, COSTCO sold 300 tons of their Kirkland Signature brand mixed nuts on Singles Day and Northwest Cherry sold over 168 metric tons of cherries within its initial months of selling in China.
4. Providing the customer a way to communicate live with the merchant during the purchase process is a key requirement.
Everyone loves a good deal. Culturally, the consumer in China is accustomed to discussing the product live with the merchant while also bargaining on price and this must be accommodated, even online. In addition to competitive pricing, successful merchants provide online chat, instant messaging and other forms of live communication with customers, and attest to the value of these investments. Live communication, accompanied with competitive pricing intelligence are both keys to effectively converting online customers.
5. Global merchants still have to deal with import and customs restrictions.
While there’s no argument that the Chinese market is large and enticing for global brands, there are still limits on how much an individual consumer can buy in a given year. Driven by customs and import regulations, these laws do create a ceiling on the potential revenue per customer. Companies like the Alibaba Group and others are actively lobbying for changes and doing business via Hong Kong entities, bonded warehouses and free trade zones but it’s worth noting that these laws must be fully considered and understood before diving in.
In addition to the 5 considerations above, another one that is globally applicable is the need for rich and relevant product content. In an ever-growing sea of products and sellers, it is increasingly important to have the right product information to help the consumer through the phases of product search/discovery, conversion, comparison and purchase. Read more here about how Indix is helping global brands and manufacturers leverage product intelligence to improve all phases of the consumer’s path to purchase.
In summary, it’s no surprise that China continues to represent a very large and rapidly growing opportunity for western brands. We also realize that there are many more considerations beyond these including logistics, payment platforms and relevant product content that come into play but hopefully the findings shared here from the session with Alibaba Group and Pacific Coast Feather are helpful.
Indix certainly plans to remain engaged on this topic while also progressing its mission of collecting, organizing and analyzing the world’s product information so everyone can act on it.
P.S. – Happy Chinese New Year to all.