Everything You Need to Know About E-commerce in China

In 2016 China surpassed the US as the largest online retail market in the world, with approximately 15% of total retail purchases being made online.

While the sector has been growing at a tremendous rate, new trends and opportunities regarding e-commerce in China are starting to take shape for businesses to take advantage of.

There is a growing demand for quality goods in China. To meet this demand, the Chinese are buying more and more foreign products from the internet.

As a result, cross-border e-commerce purchases now account for 40% of online transactions in China and are expected to dominate 50.7% of online transactions in China by 2020.

Goldman Sachs projects that China’s online retail market will grow to an enormous $1.7 trillion market by 2020. So how can you & your business utilize e-commerce to get a slice of the 1.7 trillion dollar pie?

Forget about Amazon, Ebay and other e-commerce platforms used in the West

If you want to tap into the enormous Chinese online retail market you’re going to have to use an e-commerce platform that the Chinese shop on.

The top e-commerce sites in China are: Taobao, Tmall, JD, and WeChat.

But what is the top e-commerce site in China?

That depends on a number of factors. Each of these platforms are designed to be used for different audiences and consumers.

They also have a variety of different requirements that make certain companies ineligible to use the platform. When it comes to e-commerce in China, there’s no “one size fits all”.

So which platform should my company use to sell to China?

To answer that question you first need to understand the fundamental differences between the different platforms.

Taobao – For Cheap Goods

Taobao is owned by Alibaba group and is one of the largest online marketplaces where anyone including businesses and individuals can sell to China.

Although this is convenient from a consumer’s perspective, as a retailer it may not be the most effective.

Although it is relatively easy to setup, businesses must compete with thousands of small businesses in addition to the large brand name corporations.

The lack of differentiation and other features makes the platform somewhat difficult to rely on.

Tmall – For Authentic Products

Tmall is also owned by Alibaba group and is China’s largest online marketplace for selling domestic and international goods.

It’s different from Taobao because it’s intended to be utilized by large professional brands for B2C transactions.

Because Tmall is designed for B2C transactions they have a more extensive criteria in the way of making your business eligible to be listed on their platform.

Advantages of Tmall

Tmall has a lot of features and marketing tools that enable the vendor to engage with their audience.

In particular, Tmall services help vendors to keep track of potential customers, and use metrics to increase traffic, promote user engagement, and ultimately close more sales. This makes Tmall ideal for large global brands that can afford it.

Tmall also operates in certain free trade zones which enable vendors to store their goods in warehouses in China for easy delivery. This gives the vendors the option to either deliver their products directly from overseas to the consumer or to ship the products from a warehouse in China.

How to join

Tmall operates on an invitation only basis, meaning that only qualified vendors are invited to join or can apply to join through a certified third party service.

Criteria to be invited

• The vendor must have a registered corporate entity outside of mainland China.
• Must process retail and trade qualifications overseas.
• Must also have a Chinese address that consumers can return goods to when necessary.
• Lastly, Tmall requires that the vendor’s Tmall account is setup by the brand owner or an authorized agency.

JD – For Easy Access

JD operates the largest online direct sales market in China. With 166 warehouses in 44 cities across China and over 4,100 delivery stations it has one of the most extensive retail delivery networks worldwide.

JD also enables foreign vendors to open shopfronts and is licensed to import apparel along with food and beverage products directly to Chinese consumers. All without them necessarily having a physical presence in China.

Advantages of JD

Not only is JD an excellent e-commerce platform but it also provides vendors with three different service packages for product delivery and storage services.

With three different types of partnership options, vendors can choose a service package that best accommodates their company’s objectives and needs.

3 Types of Partnerships with JD

1. Franchising Business Partner– Vendors are able to setup a store in JD and use JD warehouses to stock their merchandise. JD takes on the responsibility of providing warehouses, delivery services, and customer service.

2. Licensing Business Partner– Vendors can set-up a store and complete the packaging and delivery. JD will supervise customer service.

3. Self-Operation Partner– Vendors can sell to China on the JD platform but the warehousing and delivery will be handled by the vendors themselves.

Eligibility Requirements:

• Must have a registered corporate entity outside of mainland China.
• Have a market cap of at least 500,000 RMB.
• Must meet trade and retail qualifications overseas
• The account must be created by the brand owner or an authorized agency

WeChat Shops – An Emerging E-commerce Platform

WeChat was originally designed to be a Chinese messaging app, but has evolved to become the most intuitive social media app in China.

WeChat has met the growing demand for paperless transactions in China with its digital payment service, Wepay.

More recently WeChat released a sophisticated e-commerce platform called The WeChat Shop. With this update, WeChat has successfully become an electronic wallet of sorts for its users, enabling them to make both paperless transactions at physical store fronts and on the digital front.

WeChat is on the forefront of turnkey solutions for seamless transactions between businesses and consumers.

Advantages of WeChat shops

WeChat is the most popular social media platform in China with over 900 million active monthly users.

WeChat shops are also becoming exponentially more popular amongst WeChat users. Since last year the proportion of WeChat online shoppers more than doubled growing from 15% to 31%.

WeChat shops are also one of the easiest e-commerce platforms for vendors to set up an online store on. This makes it very accessible for small to medium sized business to have an online store available to the Chinese without having to pay tens of thousands of dollars or have a slew of official Chinese business documents.

For smaller brands WeChat shops are the most cost-effective solution for selling their product in China.

Eligibility

To be eligible you must have a registered Official WeChat Service Account.

You can either make an official WeChat Service Account on your own Chinese business license or you can hire a third party agency to setup your account on their Chinese business license.

Additional blogs to check out

WeChat has also launched WeChat mini-programs which are proving a huge success with over 230 DAU! Check out our in-depth discussion on what they are and how to use them here! 

If you are interested in the China Ecommerce Trends from the Top 5 shopping apps we’ve just written a blog about that too! Check it out here to find out whats trending in 2019!

If you need more information about e-commerce in China, contact Dragon Social, your reliable digital marketing agency.