China’s e-commerce landscape in 2017
By Sylvia Wei
2017 is the ideal time for Australian retailers to enter the Chinese market, but only if they’re willing to learn from past successes and failures, embrace consumer culture and implement tailored marketing campaigns. Here are five key predictions for how China’s e-commerce landscape will evolve in 2017:
- The Chinese e-commerce sector will stabilise
The downside to this explosion is that many rogue traders also emerged from all around the world, either selling counterfeit goods or over-extending themselves. The industry started spiralling out of control as a result.
In response, the Chinese government introduced a series of new tax policies and regulations in 2016 aimed at making B2C e-commerce and traditional B2B2C bulk trade a more level playing field. It had an immediate impact, with the total volume of cross-border e-commerce transactions dropping by almost half since it took effect in April 2016.
Looking at 2017, policies will no doubt continue to be fine tuned, especially the ‘positive list’, which currently allows popular foreign products to be imported via China’s free trade zone. The Ministry of Commerce of the Government of China (MOF) recently announced that this tax policy will be postponed until the end of 2017.
These new tax regulations shouldn’t discourage prospective Australian retailers. The Chinese e-commerce landscape is entering a more stable period in 2017 that will benefit both the vendor and consumer.
- The number of retailers operating outside the Tmall marketplace will increase
Tmall Global, Alibaba’s shopping platform for overseas sellers, can be prohibitively expensive once all costs are factored in. There’s also a risk that products will be placed alongside counterfeit goods, which can damage reputations.
Some global retailers are giving up their Tmall stores and seeking new ways to reach Chinese customers. Top US luxury accessories retailer Coach, for example, recently parted company with Tmall Global for the second time, citing dissatisfaction with the operation of the site, commission costs and fees for traffic acquisition.
Other retailers such as Amcal, have launched their own Chinese websites rather than using existing Chinese e-commerce platforms, to have more control over sales and the merchandising of their ranges.
- WeChat will continue to dominate, but watch out for Weibo
Weibo is another key social media platform that retailers can employ to boost sales. Commonly known as the Chinese Twitter, this microblogging site grew by a third in 2016 and now has almost three million users. It’s a popular way for Chinese to follow content posted by online influencers and this trend looks set to continue.
- Mobile will supersede all other routes to market
Mobile commerce already accounts for just over half of online sales in China. With smartphones now representing over 90 per cent of new phone sales, this trend is likely to increase. During China’s biggest online shopping event, Singles Day (also known as Double 11), 82 per cent of sales came from mobile.
WeChat has provided the ultimate gateway for retailers to reach consumers via their smartphones and enables them to build mutually beneficial relationships with customers via their official accounts. Another huge draw is that payment by mobile is painless. Customers create a WeChat wallet by linking to a bank card, and can then shop with ease.
- Retailers will become better at localisation
With a population of nearly 1.4 billion, there is huge disparity in each of China’s 34 regions, with numerous factors such as household income, language, education, culture and logistics influencing purchasing habits.
Traditionally, it was perceived that residents in Tier 1 cities such as Beijing and Shanghai were the key demographic retailers should target. Australia’s Pharmacy Online, for example, has most of its users located in these cities along with other affluent areas such as Jiangsu and Guangdong provinces, where many consumers have either lived or been educated abroad and are familiar with Western brands.
Generally speaking, eastern and southern coastal regions are more affluent than inland provinces, but there’s also been a notable rise in the number of consumers in Tier 2 cities including Suzhou and Ningbo, where living costs are cheaper and many people are using their disposable income to try out overseas shopping.
For Australian retailers, it’s about finding the right market for your products. Good planning and strategy is important, but dealing with the practicalities of delivering that strategy is often complex. Local knowledge is everything.
These trends are opportunities. The cross-border e-commerce landscape is maturing and the uncontrolled model of the past few years is evolving into a more sustainable and healthier business prospect for Australian retailers looking to sell in China. The market is there, the bubbles no longer.
Sylvia Wei is Azoya’s deputy managing director for Australia.