It is no longer a secret that China is a pioneer in setting a record for e-commerce. In 2020, 782 million Chinese were buying online. In 2021, China reached a new milestone. For the first time in history, e-commerce sales accounted for more than half of retail sales with an estimated 52% compared to 45% the previous year. The pandemic may have accelerated the development of e-commerce, but the foundation of this growth is nothing new.
Looking at the expected increase in e-commerce sales, China will unsurprisingly remain the leading country with an estimated $1,556 billion in 2024.
The e-commerce ecosystem in China is indeed very complex and, as we can see, well established in the Chinese consumption habits. Recently, Tmall, Pinduoduo, JD.COM, Douyin, and many other e-commerce platforms have gained power.
As a result, it is unthinkable for a company to hope to prosper in China without carrying out an audit on the Chinese market. Being a leading company in its home country is one thing, but it does not mean that the same strategy will lead to the same results in China.
It will be crucial for any company wishing to perform in China to gauge the consumers’ expectations and needs. Brands need to ask themselves the following questions. Will my product appeal to Chinese consumers as it does in my domestic market? Will my brand resonate with Chinese consumers? This preliminary audit will allow companies to start measuring the investment they will need regarding the branding and marketing dimensions.
Chinese social media are a good starting point for this kind of audit. The e-commerce platforms and the number of resellers (daiguo -代购) selling your products on the platforms are also good indicators of the appetite from Chinese consumers to your brand.
The Chinese market is substantial due to its geographical size and population, but this does not mean that companies should hope to reach the entire population. On the contrary, it is essential to define the targets precisely and how the brand will position itself towards these consumers among the brand’s competitors. It is important to keep in mind that many brands revise their positioning when they start doing business in China because of the difference in consumption behaviors, expectations, and market competitiveness.
Creating a “Hero Product” is highly recommended in China to differentiate itself from the competitors. This product will embody the brand DNA in China and lead the sales.
This product occupies a central position in the merchandising strategy and must be chosen carefully. This product should be easily recognizable and associated with the brand, and it should also reflect the positioning you want to have in China. Another essential part of merchandising is the inventory depth. It is crucial to anticipate the quantities the platform will require, which is three times the sales target and the replenishment lead time.
After the preliminary brand audit and the positioning strategy, it is important to determine the e-commerce and social media channels you will leverage in your strategy. An agency specialized in China’s business will be able to help you plan your channel mapping for China. Suppose you hesitate between domestic and cross-border e-commerce? In that case, we encourage you to read our other article: China E-Commerce Strategy: Cross-Border or Domestic E-Commerce; What to Choose?
Finally, the most significant piece to tackle during a China e-commerce consulting project is calculating the investment and estimating the profit in a business plan. Undervaluing the investment needed for such a project is one of a brand’s biggest mistakes. Contrary to popular beliefs, the Chinese market is not as cheap as it used to be, and there are several reasons for this.
First, e-commerce activities in China require brands to find a partner to operate their online business on the platforms such as Tmall and JD.com. These businesses are paid with monthly fixed fees and commissions. It is the case of Full Jet powered by Baozun. We act as an entire business unit of our partners by taking care of all e-commerce on all the platforms. Regarding the platforms’ costs, the brands need to pay annual fees and commissions to start selling.
Secondly, it is vital to keep a significant budget for marketing. Substantial investments in marketing are necessary, both on e-commerce platforms and social media. Performance marketing is like a virtuous circle on China’s e-commerce platform. The more media buy a brand spends, the more visibility the brand will have on the platform and its events, boosting its sales, etc. Other key channels for the brands to raise their awareness and convey their China activities are social media. Social media management also generate a lot of costs like account strategy and management, content creation, celebrity, and KOLs partnership, special campaigns, events participation, etc.
In conclusion, it is worth remembering that a company needs to be well supported before and during the launch of its online activities in China. At Full Jet powered by Baozun, many of our consulting projects evolved into e-commerce operations. Because we have the China market knowledge and the deep brand knowledge, we can ensure a smooth e-commerce launch.