To gain a foothold in the lucrative but challenging Chinese market, western brands should look online
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Western brands should take advantage of the growing Chinese digital economy to expand their businesses, the latest report by ecommerce consultancy Practicology suggests.
It cites research that shows 47% of global ecommerce sales took place in China in 2016 – an amount that is predicted to rise to 60% by 2020.
It adds that China had 731 million internet users at the end of 2016, compared with 743 million across the whole of Europe, and 695 million mobile web users. Figures also suggest 467 million people in China shop online.
Practicology says there are strong opportunities for those offering unique “private label” products to expand into China with a local web presence.
It identifies three online routes that provide the most opportunities for western retailers: online marketplaces such as Tmall and JD.com, which command the most market share; direct-to-consumer local websites, which give brands more control over pricing; and mobile app WeChat – used by brands such as Gucci and Burberry – which is the most cost-effective way of establishing a web store.
Practicology’s direct-to-customer clients in China include Skechers, which is set to launch a direct-to-customer website later this year that will sit alongside its Tmall and store presences. The new site will help it to deliver an omnichannel experience alongside its physical shops, tell its brand story and establish full-price sales online.
Retailers have been urged to build on demand for ecommerce among consumers in smaller cities, even if web penetration is higher in top-tier cities such as Shanghai and Beijing, as they are less able to access western brands through stores.
Practicology chief executive Chris Vincent says: “Despite the slowdown in its economy, we believe that China offers the best growth opportunity for western brands that can adapt to local nuances. [Online] marketplaces are still a critical route to market for many international retailers and brands, but that’s only part of a quickly adapting story. Those that want to keep up must also evaluate other online routes and digital marketing platforms to service increasingly sophisticated Chinese consumers.”
Practicology says common mistakes that western brands make include a lack of localisation for product content, pricing and promotions, and not having clear targets for metrics and timescales for success. Additionally, retailers are “too dependent” on their partners for strategic advice, or have not invested enough in cross-platform digital acquisition marketing to drive demand.
The report includes a checklist for retailers seeking to establish trade partnerships with Chinese ecommerce businesses. Retailers Suning and VIP.com were highlighted as players that western brands ought to familiarise themselves with, as both have been increasing their market share while that of others, such as Tmall, has been shrinking.
The Drapers Verdict
With demand for online shopping in China on the rise, retailers should take advantage of its digital potential. Brands have turned to partnering with established online retailers for a speedy route to market, but they will need to tread with caution, given the temptation to rely on partners too heavily for interaction with Chinese consumers. Nevertheless, with targeted and detailed strategic planning, there are plenty of opportunities for them in China.
The Chinese market scope
68% of ecommerce sales in China will be on mobile devices by 2020
90% of customer purchases in 2020 are predicted to involve digital at some point in the shopper journey
43% of global luxury brands have launched a Chinese transactional website