There’s no doubt about it, China is the world’s largest e-commerce market, and it’s still brimming with potential growth and excitement. Chinese shoppers currently make up some 40% of the world’s online retail consumption, and it’s increasingly consumers from China’s second-tier cities like Guiyang and Zhengzhou that are driving this growth. Having increased their online purchases by 39 percent in 2017 to US$199 billion, this group of buyers now represents over 17 percent of total online purchases.
By Sushant Mantry, Vice President, Cross Border, DHL eCommerce
It’s not just local Chinese that are pushing the boom; the massive number of Chinese living overseas are also shopping like crazy online.
In Sydney, Australia, Chinese ‘daigou’ – an overseas personal shopper – ‘AU Make’ has over 60,000 users on their platform, users who regularly ship products from Australia to China. Some purchases go to their friends and relatives, but mostly they’re destined to strangers who are simply demanding products ‘Made in Australia.’ ‘Daigou’ – the Chinese practice of buying on behalf of someone else – is estimated to be a US$1 billion industry and we now offer a dedicated shipping product, DHL Parcel International Direct from Australia to China, to support it, a product which is fully compliant with e-commerce import clearance regulations and policies.
One common trait of the ‘crazy rich Asians,’ no matter where they call home, is that they just can’t resist a great deal. With the rise of platforms like Taobao and JD.com offering huge discounts or unbeatable direct-from-manufacturer deals, we are also talking about tremendous volumes of ‘Made in China’ products flowing to the U.S., Europe and Asia Pacific. Demand has been so huge we now have a dedicated product shipping service from China to the U.S., Canada, France, the U.K., Germany and South Asia.
A different way of shopping
But if you’re hoping to tap into this shopping-mad audience, you’ll need to get to know it a little better.
Chinese consumers don’t approach e-commerce the same way as consumers in other countries.
For instance, in China, e-commerce platforms are the primary way consumers discover new products, find information, and socialize with friends. PricewaterhouseCoopers’ 2017 Total Retail report found that 61 percent of Chinese consumers begin their shopping journey through searches on Tmall, whereas only 39 percent of Americans began with Amazon.
While the online landscape is dominated by Alibaba’s Taobao shopping portal and JD.com Inc.’s big e-retail website, smaller sites are making an impact. Little Red Book, for instance, is a community-based e-commerce platform with more than 60 million users that targets Chinese women aged 18-35. Based on word of mouth, Little Red Book’s sales revenue hit a billion Chinese yuan in May 2017 – equivalent to over US$146 million.
Another important Chinese platform is WeChat, or Weixin as it’s known in China. Since its launch in 2010, it has grown into the most popular mobile app in the country with over one billion monthly active users who chat, play games, shop, read news, pay for meals and post their thoughts and pictures. You can even book a doctor’s appointment with it. The app also uses ‘WeChat Pay’ and QR codes – another big trend in China – and allows people to pay at cashier-less pop-up stores all over the country.
Platforms and services designed to cater for Chinese consumers’ preferences are setting a global precedent for future e-commerce, especially since the growth of what is termed ‘New Retail.’
This focuses on consumer experience by connecting convenience with experience and big data analysis. Alibaba Chairman Jack Ma defines it as “the integration of online, offline, logistics & data across a single value chain.”
Cross-border goes both ways
According to Nielsen’s online shopper trend report, the proportion of Chinese consumers who had recently made a cross-border e-commerce purchase reached 67 percent in 2017, compared with only 34 percent in 2015. There’s no doubt that the growth of China’s economy has spurred the rise in Chinese spending power around the world, with certain sectors proving to be more popular than others. European luxury brands, for instance, have always been big with Chinese consumers, and there is stiff competition among Chinese marketplaces to attract top luxury brands to sell with them. There is also the common perception in China that products made in Western markets are less likely to be counterfeit – which is a huge issue for Chinese products, particularly cosmetics, luxury goods and food. So it’s no surprise that Chinese consumers spent close to a thousand U.S. dollars per person last year on foreign goods, especially in those categories.
But cross-border shopping doesn’t just go one way. There’s a growing demand for Chinese products worldwide. China-based cross-border e-commerce sales to some 200 countries were worth US$140 billion in 2017 according to Chinese e-commerce solution provider Azoya Consulting. Electronic goods are in particularly high demand and virtually every product is ‘Made in China’ regardless of the brand origin. In India for example, Xiaomi products are selling like hot-cakes, and the brand crossed USD one billion in revenue in India alone.
It is becoming increasingly easy for Chinese brands to get their products to an international audience.
China-based e-tailers can sell their products globally through various e-commerce platforms in countries such as the U.S., the UK, Germany, Canada and Australia. JD.com rolled out a cross-border B2C platform in 2015, with Spanish, English, and Russian versions and plans to expand into the U.S. and European markets this year. It has already announced plans to open an office in Germany by the end of 2018.
‘Made in China’ equals quality
This expanded worldwide footprint is becoming increasingly important as Chinese brands become more and more well-known and accepted globally over Western brands. This is especially true for younger generations, where buyers in America and Europe have less of a negative perception towards Chinese brands. E-commerce has been a huge driving force in this change of thinking. Tech brands like Lenovo, Huawei and Xiaomi are now a common sight on the world’s high streets and respected for their quality.
This year’s World Cup also gave Chinese brands an excellent opportunity to be seen by an international audience. According to the research company Zenith, China contributed one third or US$835 million of the total advertising spend on the tournament in Russia, making it the biggest spender. Seven of the 19 corporate sponsors were Chinese. The logos of companies like Wanda Group, Mengniu, Vivo, and Hisense were beamed onto millions of screens around the world over the course of the tournament.
Another sign that Chinese companies are ready to launch internationally are the early-stage discussions among Alibaba Group, Tencent Holdings and China Media Capital Holdings (CMC) about buying roughly 20 percent of WPP China – part of the world’s biggest advertising group. Alibaba has also agreed to pay US$2.23 billion for a 10 percent stake in Focus Media, a digital advertising company that operates screens in subways and elevators across China. This could boost Alibaba’s core e-commerce operations, extend the company’s reach as a media operator, and may also mark the start of Alibaba’s move into the advertising sector.
We could very well see the demand for Chinese brands increase in Western households in the near future as a result.
Low-cost, international shipping
Advertising may be moving up the agenda for China’s e-commerce giants, but when it comes to getting products to customers overseas, low-cost and reliable international shipping services are crucial.
For consumers, delivery is one of the most important parts of the e-commerce experience and it can represent the biggest hurdle for cross-border shoppers. Customs duties and delivery charges can be expensive and customers need to know these costs up front. Products also take longer to ship from China to the U.S. or Europe and returns can be a problem.
One way around these issues is to use specific shipping services designed for the cross-border e-commerce market from China to the rest of the world and back. Shipping services like DHL eCommerce’s Parcel Direct offer a direct connection to 220 countries, including emerging markets such as Israel, Mexico, Thailand, Malaysia and Vietnam. Parcel Direct offers end-to-end tracking, delivery confirmation and a duties and taxes paid clearance option as well as returns handling options. New lanes have just opened up for Germany, France and Canada for sellers in China, making it easier and easier to reach out to consumers in these markets where demand is ever-growing.
At the end of the day, no matter where a customer is based, where they’ve bought their goods from or whether they’ve paid with a credit card or a digital wallet – once they’ve pressed the buy button, they want it delivered cheaply, reliably and fast.
If you want to tap into Asia’s crazy e-commerce phenomenon, offering consumers integrated shipping services will make cross-border shopping much more attractive for customers and even more lucrative for your business.