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LONDON RETAIL OPINION

Tuesday December 13 2016

The ABC Of Global Commerce In China


Georges Berzgal, Pitney Bowes Vice President for Global eCommerce EMEA, explores how foreign retailers and marketplaces can effectively create a route to the Chinese market


Georges Berzgal

GEORGES BERZGAL | Pitney Bowes VP for Global eCommerce EMEA




The ABC Of Global Commerce In China

Consumers in China, the world’s most populous country, now have both the means and the technology to buy goods from overseas. The middle class is swelling – and looking to western countries including the UK, to buy everything from speciality food to luxury goods. Retailers from Amazon to Zara are now targeting the Chinese market.

Here’s our ABC primer on how to create your route to China and make the most of this important opportunity.

A is for the Alibaba effect

Chinese middle-class consumers have caught the shopping bug, and online and mobile commerce mean that imported goods from around the world are now within reach. Singles Day, launched as a shopping festival by the fast-growing and market leading Alibaba Group in 2009, is fast becoming a global phenomenon.

Earlier this month, sales on 11.11 – dubbed Singles Day because the numerical date contains only 1s – reached new highs on the etail giant’s websites, with consumers spending a collective $17.8Bn (£11.7bn)[1], shattering its earlier record of $14.3bn (£9.4bn) in 2015.[2] So dominant is Alibaba in China that even veteran marketplace Amazon last year opened its own shop on Alibaba’s Tmall site.

At the same time as online shopping grows rapidly among domestic Chinese consumers, more people from the country are travelling abroad. This is a time when they are more likely to spend, according to a 2016 Globe Shopper report[3] that suggests 81% of Chinese travellers plan to shop in the countries they visit. Indeed, on average, each plans to spend €3,544 (£2,987) on their overseas travels in 2016, the report found. It says that Chinese travellers together account for about a third of global tax free shopping sales.

A recent study[4] by Pitney Bowes also highlighted that consumers who travel and shop will revisit those stores online when they return back home. Of the consumers from China surveyed in the study, 65% said that they made an online purchase from a retailer in another country after shopping in their stores during their travels.

At home, Chinese shoppers spent $672bn (£504bn) online in 2015 – equivalent to 19.6% of total retail sales – and an ecommerce spend that outstrips all other countries, according to eMarketer 2015 figures[5]. That number is projected to rise to $1,568bn (£1,177bn) by 2018, when online sales are expected to account for 28.6% of all retail sales. It’s clear that there’s a great, and growing, appetite to buy international goods, whether online or while travelling.

British retailers are in a good position to satisfy some of that demand. According to eMarketer.com, the UK is the fifth largest overseas market for Chinese shoppers. Of those shoppers who buy from international retailers, 11.2% buy from British retailers.[6]

High up on the typical shopping list are luxury goods from retailers such as London-based brand, Dune. Products with a distinctively British flavour are selling well, in categories from food to homewares and baby products as well. Lately, for example, British supermarket Waitrose has started selling goods including its Waitrose Baby range and the Prince of Wales’ Duchy Original range of biscuits online via Royal Mail’s Tmall store. Sainsbury’s, meanwhile, is focusing on the British breakfast, and the English afternoon tea for its Tmall sales – and recently doubled its range thanks to an enthusiastic reception for its wares.

Consumers in the Chinese market are particularly keen to make sure that what they’re buying is the genuine item. If a retail brand from outside China has their own website, rather than selling through a Chinese reseller, that will always carry more credibility and help to increase the conversion of that retailer selling into China.

Shoppers are also more likely to shop via their mobile devices. The eMarketer report suggests that about half of ecommerce sales in China will take place via mobile devices this year – compared with 33% in the UK.[7]

Pitney Bowes’ own Global Online Shopping study also supports that, revealing that 55% of the consumers surveyed in China use mobile devices for their purchases.[8]

B is for barriers to entry

The opportunities are vast. But while the Chinese market has enormous long-term potential for British retailers, a number of factors mean entry into the market can be complex. These start with universal issues such as the importance of getting the language, currency, checkout and payment methods right, so that shoppers can buy in a manner that is familiar to them. 59% of Chinese shoppers choose e-wallets as payments method, 22% credit cards (like UnionPay) and 12% debit/bank transfers. For retailers limiting payment options and not adapting to Chinese preferences could mean abandoned carts.[9]

Distribution, however, is arguably the trickiest area. Customer information, such as passport details, is needed before goods can clear customs requirements and be delivered. How retailers clear goods into China can be complex because it can be done in a couple of different ways, either through a personal consumption method or through a formal clearance. And those have different duty and tax rates associated with them. Having a good procedure in place to ensure the information is available before the consignment arrives is key.  

As well as the technical difficulties of importing to China, there are also enormous logistical challenges once the products have made it through customs. While a growing number of shoppers have access to foreign brands and retailers via the internet and m-commerce, the vastness of China’s geography means that delivery in the 23-region country can be variable beyond its key municipalities. Once you get the goods into China, there are a lot of options for the final mile, but it is all about making sure that retailers partner with the right company to get the goods to the customer.

C is for the consumer experience

Many western brands move into the Chinese market through marketplaces such as Tmall or JD.com. And that’s a good place to start, since 61% of Chinese shoppers would use marketplaces to buy most of their cross-border purchases.[10] That said, not all retailers have the resources to become a Super Brand, as Sainsbury’s has done for its sales on Tmall, and answer the direct call from consumers to retailers. 

It is important to ensure good awareness of the brand in addition to an online presence. There needs to be a marketing strategy behind it, so that retailers are helping to build the brand and actually get the attention of the customer.

Social media is an important part of the mix. The 2016 Pitney Bowes Global Online Shopping Study found that 20% of shoppers use social media to find the items they go on to buy.[11] Getting to grips with a wide range of popular social media platforms in the country is a good start. Brands should learn from the platform they’re on and local staff how shoppers tend to use the site. Conversely, Chinese consumers tend to check private email infrequently and are apt to miss emails regarding new sales.

Chinese people are now keen to explore the world, both through travel and by buying products from other countries. It is an enormous and growing market that is spending strongly – eMarketer figures estimated that China accounted for 40% of total worldwide online sales in 2015[12] – making this a great time to start selling to China.

Nonetheless, there is no denying that China is a complex market to trade in, especially when dealing with integration, currency conversion, multiple payment options, tax, duty, compliance, changing rules, merchandising tools, and cross-border logistics. However, working with the right partners can make it much easier. Companies like Pitney Bowes help retailers navigate the avenues into the Chinese market by eliminating some major complexities that brands would face if they were to go at it alone.

Retailers who have international ambitions, and are looking for growth outside their home markets, cannot afford to ignore the potential represented by the Chinese market. Tapping into that market is not an easy task, and requires thorough research, patience, and a phased approach.

More information and insight on online shopping habits and the Chinese market, as well as other territories, can be find in Pitney Bowes 2016 Global Online Shopping Study.

 

 

First published in Brand Quarterly.

 

[1] Singles' Day Sales Scorecard: A Day In China Now Bigger Than A Year In Brazil (http://www.forbes.com/sites/franklavin/2016/11/15/singles-day-scorecard-a-day-in-china-now-bigger-than-a-year-in-brazil/#40c85cfc29d0)

[2] The global consumer uncovered, eCommerce Insights 2015 (http://insights.ecommerceexpo.co.uk/category/cross-border-ecommerce-and-internationalisation/)

[3] The Globe Shopper Report 2016, from Global Blue (http://corporate.globalblue.com/press-centre/global-blue-releases-the-globe-shopper-report-china-edition/)

[4] Pitney Bowes Global Online Shopping Study, 2016

[5] China Ecommerce: 2015 Market Update; eMarketer.com (http://www.emarketer.com/Article/Ecommerce-Drives-Retail-Sales-Growth-China/1013028)

[6] China Ecommerce: 2015 Market Update; eMarketer.com (http://www.emarketer.com/Article/Ecommerce-Drives-Retail-Sales-Growth-China/1013028)   

[7] China Ecommerce: 2015 Market Update; eMarketer.com (http://www.emarketer.com/Article/Ecommerce-Drives-Retail-Sales-Growth-China/1013028)

[8] Pitney Bowes Global Online Shopping Study, 2016

[9] Pitney Bowes Global Online Shopping Study, 2016

[10] Pitney Bowes Global Online Shopping Study, 2016

[11] Pitney Bowes Global Online Shopping Study, 2016

[12] China Ecommerce: 2015 Market Update; eMarketer.com (http://www.emarketer.com/Article/Ecommerce-Drives-Retail-Sales-Growth-China/1013028)

 



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