How to ConquerCross-Border E-Commercein China

IMS is a digital transformation agency that uses technological solutions for data-driven strategies that transform businesses. We believe in agility, transparency, and most of all, results. For more information, visit our website at http://www.imanagesystems.com/

Scan the QR code on this page for an interactive version of this e-book.

The ultimate guide for foreign businesses to promote their products, raise brand awareness and drive online sales in China

IntroductionCross-border e-commerce (CBEC) isan exciting channel for foreignbusinesses looking to get a slice ofthe Chinese market. Through CBEC,you avoid the costs and headache ofsetting up your corporate presencein China.

But although it is one of the mostefficient ways to get your productsinto the homes of this vast market, itstill requires patience, and mostimportantly, an intimateunderstanding of the fears andfancies of over 60 million CBECconsumers.

Your Guide to SuccessfulCross-Border E-Commerce in China

Not convinced that CBEC in China candrive phenomenal business growth?Check out these statistics.

• CBEC in China is predicted toexceed USD 1.4 trillion in 2018,representing almost 30% of thetotal value of e-commercetransactions in China

• The cross-border retail importmarket predicted to surge toUSD 96 billion in 2019,representing a year-on-yearincrease of 25% from 2018

• It is predicted that by 2018 therewill be 74 million CBEC users, anincrease of almost 30% from2017

China’s statistic of 772 million internetusers is more than double the population ofthe United States, and yet this figurerepresents an internet penetration rate ofjust over 50% (user penetration for e-commerce was 72.3% in 2018 and isexpected to hit 80.5% by 2022).

Not only is it home to more online shoppersthan any other country, China is still at thedawn of its middle-class boom. Risingdisposable income from more than300 million middle-class consumers hasenabled consumption upgrade, a trendwhere consumers are increasingly confidentspending money on categories such as food,cosmetics, and clothing.

These factors have all helped contribute to aremarkable rise in e-commerce activity forboth home and imported goods.

And this is just the beginning of China’s mindboggling growth in the e-commerce space.

1. It's a growing market with a surgingdemand for foreign goods availableonline. This demand is fueled byfrustration about so many fakes on themarket as well as high taxes on foreignproducts.

2. CBEC can test your products on themarket without needing to first committo the regulatory and licensing costsrequired when setting up a formalpresence in China.

3. Preferential policies for expeditedcustoms clearances, favourable taxrates and efficient grouping of logisticsservice, make CBEC more attractive.

Case Study: Yihaodian, China’s largestonline retailer of food and beverages,facilitates foreign sales by allowingforeign businesses to sell tax-free andto be exempt from China’s domesticproduct standards through ‘cross-border’ e-commerce. Companiesusually benefit from VAT,license/permit and Chinese labelrequirements.

3 reasons why overseas businesses should invest in CBEC in China

Why the CBEC frenzy? Trend-savvy middle-class consumersare on the hunt for foreign itemsnot yet available in the domesticmarket, while otherdemographics choose to importoverseas products for theirperceived higher value. CBECsites also offer higher degrees ofprotection against counterfeitgoods. In some categories, suchas baby food products, the sameproduct under the same labelcan be listed under an eye-watering price up to three timesthe price listed in its homemarket.

Imported goods are increasinglysought after by Chineseconsumers. In 2017, 67% ofconsumers had made a cross-borderpurchase online, almost double from2015 (34%). Platform giants haveresponded enthusiastically to thisgrowing need, with the fast-risingpopularity of dedicated cross-bordere-commerce platforms suchas Kaola, TMall Global or JD Global,or more niche platforms such asXiaohongshu.

Those consumers who do consumeforeign products through CBEC do sowith gusto. Among those Chineseconsumers purchasing internationalproducts, more than 65% makingpurchases at least once a month,and 11.6% making purchases morefrequently than once a week.

Consumption upgrade

Key takeaway: Companies can leverage theirinternational status to instill confidence inconsumers and raise their brand status, forexample by promoting international qualitystandards or foreign lifestyles (from European-sourced milk to Scandinavian minimalistfurniture), all while potentially enjoying higherprices.

71% of Chinese consumersadmit to spending more whenexperiencing positive socialinteractions (compared to 44%globally) during the purchasecycle.

This trend is also compoundedby the high concentration ofmobile shopping. Social mediaapps are architectedto accommodate as much ofthe consumer journey aspossible, such as withshoppable ads and integratedpayment solutions. It ispredicted that mobile e-commerce purchases will makeup almost 74% of total e-commerce in China by 2020(compare this with 46% in theUS). This growing figure hashelped catapult thedevelopment of closed loop,feature-rich ecosystems. Smartmarketing strategies frombrands looking to successfullypenetrate the Chinese marketwill take advantage of all thebrand-consumer touchpointsthat these platforms provide.

The power of social selling

If you want to sell in China, you have to have a knack for social. In e-commerce, the convenience of online shopping and the engagement of social media platforms integrate seamlessly to produce a unique, multi-faceted environment ripe for converting customers. Social elements are built into online platforms: they have to be built into your social strategy too.

The rise of purchasing opportunities on China’s homegrown messaging platforms has deep cultural significance, as relying on friends’ recommendations for products and services is an organic extension of the idea of guanxi (which in simple terms can be summarised as the act of doing business with people you know). The proof is in the purchase:

Finally, China’s iconic e-commercefestivals, such as Double 11(otherwise known as Singles Day),are also an opportunity forinternational brands to capitalize onunprecedented movements ofshopping frenzy. According toresearch, 79% of consumers intendto participate on Double 11: ashopping festival that saw JD andAlibaba enjoy a surge in growth of50% and 39% last year, respectively.Around 30% of purchases are frominternational brands.

Chinese online consumersbehave very differently to theirWestern counterparts. Their pathto purchase is programmed to bedifferent: shaped by integrated e-commerce platforms andchannels that themselves reflectthe inherently social culture inChina. Shopping online here hasan emphasis onexploration, where discovery andpurchase are molded into oneexciting customer journey!

Understanding your new audience: the Chinese consumer

Don't underestimate the changeit takes to adapt your currentdigital strategies to China. It's awhole different ball game wherethe stakes are higher, growth ishigher, and the competition iswell-versed in pleasing localconsumers.

Key takeaways: Social selling is key to unleashingthe full potential of the Chinese market, but only26% of retailers have a formal plan in place forexecuting their digital strategy. Mastering a sociale-commerce strategy is crucial tosuccessfully breaking into – and surviving – in theChinese market.

Ying Yue, a young mother, sees a targetedad about bulk discounts for organicproducts for mothers while browsingWeibo. She follows the brand on WeChatand shares the link to a WeChat group shehas created with her friends. Her friendscheck the reviews before completing thepurchase on WeChat Pay.

A couple of her friends use Ying Yue’sreferral code to follow the brand’s WeChataccount, which give them all extra loyaltypoints to redeem against future offers. Twoweeks later, she participates in the samebrand’s mini-programme for parents andtheir children to learn English togetherthrough songs and games.

The brand is also hosting a singing contest,which she enters and encourages herfriends to vote in. She is awarded points forher participation which she redeemsagainst a special offer received via WeChata few days later.

Zhenzuo Ye, a keen runner, sees an adwhile browsing Taobao. He sees aninteresting link to an article onhealthier breakfasts that help maintainenergy throughout the day. He clickson the article, and browses a few linksembedded in the article torecommended products. He finds alink to a fitness forum about buildingstamina for marathons.

He posts a question to the communityto ask for advice on how torecover quickly after long runs. Onecommunity member responds with asuggestion for a foam roller thatrelieves muscles ache. Zhenzou Yeclicks the link to the store and chatswith the merchant to betterunderstand which product would suithim.

As he is waiting for a reply, he receivesa notification for a live-streaming videohosted by a fitness KOL he admires. Heclicks to watch and uses theembedded purchase link to order thecool new trainers the KOL is wearing inthe video. Meanwhile, the merchantreplies with a productrecommendation, that he adds to hisbasket, and checks out with a singleclick.

Example 1 – Purchasing directly on WeChat

Example 2 – Purchasing one-commerce platforms

• Adopt technology that helps youpersonalize brand-user experiences.Look beyond buying history andexamine other data such as geo-localisation and recent interactionswith your brand. This is invaluablefor automating journeys based onuser actions

• Leverage social commerce such asKOL tutorials, contests, or onlineevents to create excitement aroundyour brand and encourage socialsharing

• Use data analytics to identify whattypes of content are most effectiveat generating conversionsthroughout the different stages ofthe consumer journey and ondifferent channels

• Seamlessly combine discovery andpurchase by using embeddedpurchase links

Key takeaways: E-commerce platforms and social media channelshave a wide range of features that brands can take advantage ofto engage and entertain consumers. Western companies shouldnot underestimate the importance of building a discovery-driven,content-rich consumer journey.

Because e-commerce platformstypically use data insights andartificial intelligence topersonalize content and productrecommendations, Chineseconsumers are used to receivinghighly tailored onlineexperiences. The result is thatbrands must leverage a content-rich strategy, tailored to theirtarget audiences’ tastes, habits,and preferred buying methods, tohelp drive sales.

Did you know? On Taobao, 320,000items are added to shopping basketsfor every 1 million views on live-streaming events.

What steps can you take to launch a successfulcross-border e-commerce strategy?

A tailored marketing strategy is crucialto reach Chinese consumers

With such a crowded marketplace,how do you get noticed in a bustlingdigital economy?

International companies looking tolaunch a successful e-commercestrategy in China must understandthe unique characteristics of theChinese consumer market and howthey affect online buying behaviour.The rewards can be high, but thestakes are high too. It’s crucial thatbrands forge new online practicesadapted to local consumerbehaviour.

Data analytics should inform everymarketing decision and drivestrategy. Rigorous review of ROI indifferent channels will empowercompanies to leverage well-performing campaigns and adapt orcut those that are inefficient.

Watch our video to learn about the shoppingbehaviours of Chinese consumers and how toapply this understanding to your marketing.

Mobile-centric strategies

According to research, 84% of consumersuse their mobile to shop online, so amarketing strategy that leveragesopportunities to reach consumers on theirphone is paramount. But this alone is notenough. Brands shouldn’t just be focusingon mobile, they should also be focusing onaudience segmentation to understand howdifferent consumers navigate online.

Social commerce

Your brand’s success in China will dependheavily on your social media strategy. Asseen from the video above, China’s socialplatforms, and the way its onlineconsumers interact and consumeinformation from these platforms, differsubstantially to how Western businessesmight understand Facebook, Pinterest,Twitter, and other platforms used by theircustomers. Almost 40% of online shopperswill make unplanned purchases orpurchase more than intended afterviewing information about a brand orproduct from its official WeChat account.

Gamification

Gamification can be a successfulapproach to helping brands build arelationship with consumers, driveconversion, and encourage returnvisits from would-be customers.

Whether through company-ownedapps or by using the possibilitieswithin social media platforms (forexample WeChat mini-games), it’s alsopossible to execute effective loyaltyprogrammes that use gamification toallow audiences to collect points andexchange them for coupons or value-adding experiences (such as unlockingexclusive content, receiving VIPtreatment, etc.).

Here are the main points you should considerwhen marketing to online consumers in China:

Chinese consumers are accustomedto personalised treatment online. Asmore and more shoppers areexposed to marketing campaigns,brands will need to work harder andsmarter to be heard above the noise.

Brands must develop attribute-richaudience profiles to refine theirmarketing message

With the rise of hyperconnectedecosystems, the power ofconversation is in the hands of yourconsumers. They decide when,where and how to interact with yourbrand. In China’s crowdedmarketplace, it’s imperative thatbrands go beyond demographics topersonalize their exchanges withconsumers.

Developing profiles through smartdata tools is a good start, butmarketers need to ensure thatthey are doing more than justgoing through the motions.Segmentation is key to effectivelycommunicating with yourdifferent audiences.

In addition, once brands retrieveinsights from reviewing their data,they need to adopt processes thatare agile enough to respond inreal time to trends and makeinformed strategic decisions.

Top tip: Having a robust CRM system andmarketing automation platform will enablecompanies to execute informed strategies usingdata, to optimize loyalty programmes, carry outtargeted marketing and obtain powerful datainsights from brand-user interactions.

In China, your data is more importantthan ever

Given the sophisticated path topurchase undertaken by Chineseonline consumers, it would bemisleading for brands to ignoreinfluential touch points from earlierstages of the buyer cycle.

Multi-channel attribution modellingallows marketers to objectivelyanalyze the effectiveness of theirefforts across all channels, at allstages of the buyer journey. In doingso, they will be able to assess ROI oftheir different channels and optimizetheir approach.

Multi-channel attribution modellingversus last-channel attribution modelling

Sources:https://www.chinainternetwatch.com/24363/cross-border-ecommerce-retail-2021/https://www.pwccn.com/en/retail-and-consumer/publications/total-retail-2017-china/total-retail-survey-2017-china-cut.pdfhttps://www.bcg.com/publications/2017/retail-globalization-china-reveals-future-shopping.aspxhttps://www.eshopworld.com/social-shopping/https://walkthechat.com/cross-border-e-commerce-china-whats-trend-2017/https://www.mckinsey.com/industries/retail/our-insights/here-comes-the-modern-chinese-consumerhttps://www.mckinsey.com/industries/high-tech/our-insights/crossborder-ecommerce-is-luring-chinese-shoppershttps://www.mckinsey.com/industries/retail/our-insights/five-keys-to-connecting-with-chinas-wired-consumers

Integrated Management Systems (IMS)36/F, 41 HEUNG YIP ROAD WONG CHUK HANG, HONG KONG+852 3611-0130

For more information on how IMS can help you reach your target audiences in China, get in touch at

info@imanagesystems.com

To view an interactive version of this e-book, scan the QR code below.