What China can teach us about eCommerce in 2017
Necessity is the mother of invention – well that’s certainly the case in China where eCommerce has evolved beyond all recognition. A low density of physical stores in a large land mass, and an audience with an insatiable appetite for foreign goods, has meant that China has become the world’s largest and fastest developing eCommerce market (eMarketer, 2016).
But they’ve done it their way – not by adopting European or North American online shopping habits but by reinventing eCommerce in a way which makes many in the West take a step back and reconsider what they’re doing.
And the results are impressive – in 2015 total retail sales to eCommerce split was approximately 85% to 15% in China compared to the U.S, where only 7 cents out of every dollar spent goes to eCommerce (The Drum, 2016).
So what are the Chinese doing differently to generate such an impressive market share for eCommerce? We take a look at the key differences in China’s commerce market and ask whether e-tailers in Europe and the U.S can benefit from Asia’s online expertise.
The social shopping
In China it’s not unusual for companies to pay consumers to sell to other consumers and receive a commission from the company. It makes sense culturally – in China there is a mistrust for advertising, regarding it like government propaganda, which means shoppers would rather rely on personal recommendations (Mashable, 2015).
Online stylists recommend products to individual clients using apps like WeChat (a Chinese version of Whatsapp) which are used by people to recommend and send consumers goods directly to sample and purchase. This personal one-to-one connection between consumers and their advisers means they’re more likely to try and buy – eager for personal recommendations from trusted experts (Wired, 2015). And it doesn’t stop there – because China is a highly connected country of social shoppers they can buy directly from one another within messaging apps meaning that the ways in which the Chinese buy is more flexible and immediate (Wired, 2015). The western affiliate market is yet to fully embrace this tactic – we’re using bloggers to broadcast recommendations but not commonly connecting consumers directly with other consumers.
The online mall
Unusually 75% of Chinese eCommerce is transacted through one site – Alibaba’s Tmall.com (The Drum, 2016). Instead of retailers building and hosting their own platforms they opt to sell through sites which act like online malls offering different storefronts on just one site. This means e-tailers don’t need to start from scratch but join an online ecosystem of retail where the traffic is already generated and their consumers are just one click away. Consumers can access multiple brands from one familiar interface with just one login – it makes browsing and shopping online simpler and offers more choice.
It has big benefits for startups and smaller ecommerce players too with boutiques being able to break into the mass market more easily by buying into the online mall where they get the same visibility and audience as the big ecommerce outlets. E-tailers achieve economies of scale by using third-party suppliers that service the online malls, offering sellers marketing, site-design services, payment fulfillment, delivery and logistics, customer service, and IT support at a fraction of the cost that they would charge for an independent ecommerce site. The concept of the online mall is an interesting model for the West to consider – especially in the light of distribution and marketing costs associated with proprietary websites or bricks and mortar shops.
The demand for international goods
It’s fair to say that some of what has driven Chinese ecommerce growth is niche purchases that can only be found online from foreign sellers. Due to China’s stringent import and customs legislation, some items are far easier to find from international ecommerce sites than on the streets of China. And the Chinese consumer is more than happy to pay the price with online shoppers spending 176% more per purchase when buying from overseas than domestically (Mashable, 2012).
In fact, the extent of the online market is so large that Chinese consumers already make up almost half of global online retail sales (Forbes, 2016). Organic food, powdered baby milk, foreign cosmetics and premium goods are all highly desirable online purchases (Forbes, 2010). It’s accepted that people will find these niche products online and pay a higher price as – unlike the western world – online isn’t necessarily somewhere where you buy things cheaply. Online is the place where you’ll find premium products and a superior shopping experience which you won’t find in China’s cities. Approaches like this teach e-tailers the power of online exclusivity and reinforces the fact that your online offering doesn’t need to be cheaper or offer a worse service than stores.
The way that China differs in its online consumption habits undeniably bolsters the aggressive development of ecommerce, which is growing by 53% year-on-year (Neilsen, 2016). This growth is further supported by the sheer volume of people, restricted shopping opportunities and high penetration of mobile phone usage (McKinsey, 2013). But the real reason e-tailers in China are so successful is that they offer the consumers more flexible ways to shop and connect with brands online.
So next time you’re looking for growth in your online channel, maybe it’s time to look beyond the tried-and-tested methods of the western world. Maybe it’s time to break the mold and to look to the East for inspiration, as they’ve undoubtedly got a few tricks to teach us.