As of now, China’s e-commerce sector is more than three times the size of the US market, which currently ranks distant second.

China has has been the largest ecommerce economy in the world since 2015. In 2019, it reached 1.94 trillion USD, representing an addition of 27% year over year and a quarter of China’s total retail sales volume.

Currently, the majority of Chinese are online shoppers which representing about 60% of China’s internet user base. When we compare this figure to US, where 88% of internet users shop online, it is evident why China still has plenty of room to grow in absolute terms. Needless to say, that the sooner your company taps into this vast market, the better off it will be.

Now, to the more practical aspect of China’s ecommerce. Generally speaking, there are two choices of selling online: opening a virtual store in one of the large online stores, or setting up your own internet store as an extension of your main website or as a stand alone site.

Plugging into China’s existing ecommerce ecosystem

The largest C2C ecommerce site in China is Taobao.com which as an equivalent to Ebay. Although, it is an entire universe in and of itself, selling on Taobao is more suitable to small retailers or individuals. It is a very competitive space and is notorious for fakes and pirated stuff. If your goal is building a trustworthy brand image you should stay away from Taobao.

Luckily, there is an alternative from the same Alibaba group that owns Taobao, called Tmall. The company goes to great extend to make sure that the product sold on Tmall are genuine. Sellers on that site have to abide by strict procedures which are even tougher for overseas companies. Read our earlier post for more details on how to establish a Tmall store and whether it’s a good fit for you.

While Tmall holds about 50% of B2C ecommerce market in China, Jingdong Mall (JD.com) is the second in size at about 22% market share as of 2013. The idea is similar to Tmall – Jingdong Mall is for branded products only and you will be expected to prove that you either own the brand or are authorized to sell it.
There are a few more such “online shopping malls” in China: Suning that focuses mostly on electronics and Amazon.cn – scaled down Chinese version of Amazon.com.

The pros of working with the existing ecommerce site can be summarized as follows:

• Traffic that goes through those sites is enormous and you are almost guaranteed to get some of it;
• Setup is not very complex, although it could be a bit tricky for a non-Chinese company. If everything is done right, your store can be up and running within 2-3 weeks;
• You can also benefit from marketing programs within the platform, although it would cost extra;

Of course, there are some cons too:

• It isn’t cheap. There are setup and running costs and a deposit, in case you are found in violation of the terms of the agreement (by selling counterfeited products for example). I discuss the cost of setting up Tmall store in more details here;
• Fierce competition from other sellers, pretty much like what you have in a traditional brick and mortar shopping mall but with more ads from every direction;
• Limited opportunity for differentiation by expressing your unique style or brand experience;

Setting up a stand alone online store

If you have a technical expertise to setup your own functional internet store than this could be an alternative route for your Chinese ecommerce strategy.

The obvious advantages of that approach are:

• You are in full control of your own store as there is no need to comply with anyone’s policies;
• Your store can provide a unique brand experience for a shopper that may not be available in Tmall or JD.com;
• There is no commissions on your sales to a 3rd party and no maintenance fees;

Disadvantages of building your own store could be as follows:

• You don’t benefit from the online mall’s traffic and acquiring it through marketing campaigns may become more expensive than paying to Tmall or JD.com for their marketing programs;
• Building your customers’ trust takes time. In the existing online mall like Tmall, trust level is high – shoppers know what to expect, fairly familiar with how it works and are quite sure that they’ll get what they pay for (and if they don’t there is proven recourse). Your customers have to be just as confident that they won’t be ripped off;
• The technical challenges can be substantial: you have to have the right payment system such as Alipay, Tenpay or Baidu wallet setup; take care of all the technical challenges related to traffic and transactions; having live support through chat; manage inventories; get a delivery system in place, just to mention a few.

As most of the examples show, and considering your marketing budget allows that, the best strategy is the combination of both approaches. Setting up Tmall or JD store for building brand recognition and attracting new customers in addition to having your own internet store for more immersive brand experience targeted at existing customers and brand followers.

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If you are selling a physical product, one of the best ways to find out what is already available is to research Taobao (Taobao.com), the primary C2C marketplace in China and its B2C equivalent, Tmall (tmall.com). Both platform belong to Alibaba and are similar to Amazon but much bigger.

Chinese Marketplace Sites Search

As mentioned before, none of Taobao or Tmall results will appear in Baidu searches, this is why it is important to research this channel separately.

While typing the search term (“sunglasses” in our example), more results will be shown as you type in, giving some insights on what other terms are frequently searched for (of course, you need to understand Chinese to make sense of it):

Additional search terms may give some more clues on what else you should be researching.

Taobao will also display a multilevel filters allowing for more targeted searches. In case of “sunglasses”, the results can be filtered by glasses shapes (oval, round, square, aviator, rectangular etc.), lens color, suitability for different type of face, gender and so on as well as price range.

The results, each with an attractive product photo, short description and the price, will be displayed right below the filters:

Typically, most results will be linking to either Tmall (like in the case of fashion items) or Taobao itself. Tmall is a type of an upscale version of Taobao with a strict policy against fakes. In the physical world, Tmall can compared to a branded department while Taobao is more of a bazaar style market.

How Taobao can help with the market research? First of all, it is the best to research product prices and price ranges for different subcategories of products.

Secondly, you will be able to better understand the overall popularity of the product category, competition and sales channels.
Finally, seeing so many competing offers grouped together may give you more insight on how yours could fit in the mix.
Side note: occasionally, you may even find your own products sold by someone else that you may not be aware of.

Stay tuned for the upcoming post on how to perform basic market research with Chinese social media.

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If you have spent some time looking at Chinese ecommerce websites, you can’t help but notice how incredibly cluttered they look. In fact, most of that apparent clutter is a result of link-heavy nature of Chinese internet in general.

What might strike a Westerner as an overwhelming overload of information is likely to be perceived as a content rich and intuitive site by the Chinese.

Here are just a few examples of the most popular sites in China:

Contrast it with the clean and modern look of the Western equivalents:

Chinese website designs seem to be completely avert to modern look with its extensive use of white space, large fonts and well designed color patterns.

Since, apparently it works in China, otherwise they would have “modernized” their designs by now, I became determined to find out why is that the case.

First explanation that I came across was given by Yu Gang and David Wei in their interview with CNN correspondent Kristie Lu Stout in one of CNN episodes “On China”:

The full transcript of the interview can be found here.

Another explanation on what is causing the preference towards link heavy sites in China was given by Barry Lloyd’s, President of WebCertain Asia (read the full article):

…when you go into the Chinese consumer psyche, they want to have a chaotic bazaar type experience…They want to create this shopping atmosphere

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Recent proliferation of Western style coffee shops and fancy restaurants gave rise to the new trend of ordering food and drinks with WeChat rather than using traditional menus.

Besides the fact that WeChat app is already installed on practically every smartphone in China, vast majority of users have also connected their accounts to bank cards and use WeChat Pay on regular basis. Using WeChat to order food and drinks is not only fast and convenient but also allows instant payment directly with WeChat Pay once the order is placed.

Moreover, it doesn’t even require for a customer to follow a particular WeChat account. All it takes is scanning a QR code, which is displayed directly on the restaurant’s table, from within WeChat app.

Here is how ordering with WeChat app works:

Step 1: customers scan the QR code which is unique to each table in the restaurant. This arrangement allows tracking orders associated with customers seated at specific location.

Step 2: immediately upon scanning the QR code, WeChat app opens a menu that looks like this:

Step 3: customers can browse through menu items just as they would with the physical version, read about each item, see the prices and zoom out photos:

Step 4: customers continue adding food items to the list until they are ready to place the order:

Step 5: upon confirming the order, payment is processed automatically with WeChat Pay. At the same time, the restaurant staff receives the order and, once ready, delivers it to the right table.

Besides the obvious convenience of the whole process for the patrons, WeChat app restaurant ordering system also eliminates the need for bill splitting: everyone can simply order and pay for their food directly with their own WeChat Pay.

As for the restaurants, WeChat app ordering offers some major benefits. Serving food and delivering orders to the tables becomes easier and allows performing the same service with less staff. Streamlining orders tracking also eliminates errors.

There is no more need to print and replace menus which, as restaurants owners know, can add significantly to the cost of operation. Moreover, WeChat app based menus can be updated much easier as new items are added or removed through the app’s backend. Prices can be adjusted on short notice and promotions on specific items can run extremely easily and at any frequency.

On top of that, the backend of the application offers various analytical functions such as statistics on sales, profit analysis on specific items and various CRM functions. All those benefits allow running restaurant business much more efficiently while offering better service to patrons at the same time.

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Basically, anything in the digital world that brings customers to the physical stores or makes them buy products and services that are traditionally sold offline can be classified as O2O.

According to the recent report by McKinsey on O2O in China, it has been growing the fastest in 3 areas: travel, mobility and dining services:

China O2O in travel sector

McKensey’s data indicate that travel is one of the most popular O2O categories used by 36% of O2O consumers nationwide and 56% in Tier 1 cities:

This segment is lead by companies like Qunar, fast growing Baidu online travel service as well as Ctrip, another hugely popular site. Customers also expect O2O travel service to cost less than the traditional ones putting more pressure on providers

China O2O in dining sector

This segment was indicated as the second growing O2O sector. Convenience and discounts stand out as the most important reasons why consumers choose to use O2O dining services.

In contrast with travel sector, here consumers were actually prepared to pay premium for the service and indicated food quality and safety as their primary concern.

China O2O in mobility sector

Mobility O2O mainly refers to taxi hailing apps such as Uber and Didi-Kuaidi. Both companies have been at each other’s throat to gain market share in this rapidly growing market which we covered in an earlier post about Uber in China. Currently, Baidu is the major backer of China Uber while Tencent and Alibaba are behind Didi-Kuaidi.

Consumers in this sector appear to be the least sensitive to the price of O2O mobility services than to the price of other O2O services. This has probably something to do with the fact that the prices in this segment are already extremely low.

What are the main reasons behind the strength of O2O in China?

#1 Sheer number of smartphones

Large number of smartphones in China is the primary reason for O2O services getting a strong foothold. There are estimated 563 million smartphone users in 2016 representing more than a quarter of users worldwide.

#2 Have we mentioned smartphones?

Another factor in favor of O2O in China is the fact smartphones has long become the primary device of getting online for the majority of Chinese, beating desktops and laptops 2 years ago. Since large part of O2O’s appeal is location, mobile is a natural fit.

#3 Mobile payment systems

Proliferation of secure and convenient mobile payment systems such as Alipay or WeChat wallet has become the industry enabler. In this regard, China is well ahead of most other countries.

#4 Everyone loves QR

QR codes can be used in many creative ways to facilitate O2O based connections and, incidentally, they have been extremely popular in China. While QR codes have been declared dead in the West on more than one occasion, they have been embraced in China and popularized by apps like WeChat.

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What is unique in China’s millennials who are born around 90’s is the their size – 211 million which is already 5 times larger than their US counterparts. Perhaps not surprisingly, they are also glued to their phones – 50% reported checking their cellphones every 15 minutes.

Social media is the main source information for 70% of Chinese millennials and they spend almost twice the time of Americans watching online videos.

Although Chinese and US millennials online behaviors are similar, the sites and platforms they are using are completely different – primarily due to the fact that all major Western social media platforms are blocked in the Mainland.

They are also big on online shopping and, primarily on mobile and they prefer branded products. Here is more on that.

Chinese millennials market and online behavior infographic

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Singles day is an informal shopping festival in China that has originally celebrated people who are still single. It falls on 11/11 which is meant to symbolize people who are not in a relationship. Since it started back in 2009, it has become the largest shopping event in China, akin Black Friday or Cyber Monday in North America, although much bigger.

Originally, the event was started by Alibaba which began offering discounts on its main shopping platforms, Taobao and Tmall, that lasted for 24 hours. The festival was picked up by other Chinese e-commerce sites like JD.com and now, increasingly, by traditional brick-and-mortar stores. Most of the action still goes online via e-commerce sites and mobile apps.

Every year, the festival kept getting bigger but this year, there were concerns that  it might actually slow down a bit. The main worry was that slowing Chinese economy and the trade war with US would dampen shoppers’ enthusiasm.

“It is possible that there will be a slowdown in growth for Singles Day sales, given that they have had exponential growth in the past,” Xiaofeng Wang, an analyst with Forrester, said before the event.

This did not happen. In fact, 2018 Singles Day raked a whopping $30 billion in the first 24 hours, beating the last year record of $24.2 billion.

Here is the latest data compiled by Statista:

Similar North American events are dwarfed by China’s 2018 Singles Day – the sales on Thanksgiving Day combined with Black Friday are about 5 times smaller.

Attempting to capitalize on seemingly insatiable appetite of Chinese shoppers for foreign products, the event was picked up by platforms outside of China. A recent survey from research firm Oliver Wyman found that 57% of China’s online shoppers consumers were planning to buy goods from overseas during 2018 Singles Day. The top countries that were most popular with the consumers are Japan, USA and Australia.

In addition, Alibaba’s South East Asia subsidiary, Lazada, was offering Singles Day discounts in Singapore, Malaysia, Indonesia, Thailand and Vietnam.

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In the first half of 2018, more than 85 percent of all Chinese ecommerce sales in retail trade were shared by ten major players on the market. Recently, the market witnessed the growth of several smaller e-commerce retailers such as Pinduoduo and Gome. However, Alibaba consistently occupies the highest place over the years, with a 58.2 percent share of all e-commerce retail sales in 2018.

Alibaba.com was originally launched in 1999 as a B2B e-commerce portal to connect Chinese manufacturers with foreign buyers. In 2003, the service expanded to C2C with the launch of the largest ecommerce marketplace Taobao and in 2008 a B2C online retail platform Tmall, which are the current market leaders in their respective business segments.

In the fiscal year ending March 31, 2018, the annual revenue of the Alibaba Group amounted to approximately 39.9 billion US dollars (an increase of 58 percent) with a net result of 9.79 billion US dollars. The annual revenue of the core commerce company rose by 60 percent to around 34.12 billion US dollars, the highest sales growth since the IPO. In 2018, Alibaba retail markets recorded 28 percent annual growth in total gross commercial value (GMV), driven by Tmall and its robust physical goods, GMV growth in clothing, FMCG, household appliances and consumer electronics categories. The following graph compiled by Statista illustrates the current state of Chinese ecommerce sales in 2018.

Chinese ecommerce sales in 2018

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The book explains in great details two main platforms that, today, are “must haves” for every digital marketing strategy – WeChat and Weibo. The book is filled with helpful tips and plenty of examples of successful strategies that work, Ashley’s book, which she shared with us prior to the its official release this week, is a must read for anyone who is serious about getting into Chinese market.

Here is more about the book:

Marketers who have struggled to capitalize on their Chinese social media presence can rest easy, with the launch of new book “Unlocking the World’s Largest E-market: A Guide to Selling on Chinese Social Media”. In response to growing interest in the world’s biggest e-market, author Ashley Galina Dudarenok has consolidated her 12 years of professional experience in digital marketing in China into an easy-to-read business book.

China has the world’s largest e-commerce economy, with revenues of 7.57 trillion yuan (US$1.17 trillion) in 2017. Hong Kong has strong business ties with China, yet many local brands and small business owners have an incomplete understanding of Chinese consumers and the online channels to reach them. There’s an increasing demand to learn about digital strategies and tactics specifically for the China market but current books on the
subject often lack practical solutions. Seeing a gap in the market, Dudarenok decided to publish a book not just for brands seeking to enter China, but also for those who want to expand their presence in China and those who provide services to Chinese tourists abroad.

“Unlocking the World’s Largest E-market” is now available on Amazon.com and Kindle. From Feb. 5th to 10th, you can purchase the ebook for $0.99 and the paperback for $5.99.

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Alibaba still dominates Chinese ecommerce with Taobao for C2C and Tmall for B2C. The other major player in B2C space is JD.com, currently this company holds about a quarter of the total market.

WeChat Weidian is another newcomer that is quickly gaining traction in Chinese m-commerce but it is not featured in this infographic due to lack of available data.

Other platforms in China ecommerce landscape are significantly smaller with market share in single digits. They also tend to be more specialized – for example, Suning and Gome mainly sell appliances and electronics while Vancle is a clothing branded retailer.

China ecommerce landscape

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