With 700 million Internet users and counting, the Chinese e-commerce market is the biggest in the world. But something that many businesses don’t realize is that China represents a huge opportunity for foreign manufacturers and retailers.
The size of the e-commerce market in China is gigantic. Imagine if literally every person in the United States and Canada was regularly buying products online. At present day, China boasts even more e-shoppers than that, at a whopping 380 million. Nielson predicts that by 2025, over 50% of purchases made in China will take place online, so there’s little doubt that the Chinese e-commerce market is a hot space to operate in.
Nielson, a research firm that has done tremendous work in the Chinese space in recent years, has also conducted a survey that found that 38% of Chinese consumers in tier 1 cities like Beijing and Shanghai are making cross-border purchases. In addition to that, 27% of netizens in tier 2 cities are jumping in to the cross-border action, meaning the market is opening up and customers are opening their wallets in a big way.
Chinese E-Commerce Market: No Growing Pains
E-commerce platforms in China are growing rapidly, and foreign enterprises are getting on board selling products across many industries, such as personal care, diapers, infant formula, grocery food, nutritional supplements and household items. If your business can do high volume, then partnering with a big platform like TMall or JD.com makes sense. But even if you are selling lower quantities of specialty products, there are still big opportunities. The Chinese e-commerce market is on pace to become the most active online marketplace in the world.
Research supports that Chinese consumers are not just looking for the lowest possible price when they look for products online. In fact, they are moving more and more towards paying well for quality, especially when it comes to high-end luxury products from foreign producers. Nielson reports that almost 40% of shoppers in China are amongst those willing to pay more for quality, meaning that the opportunity for specialty high-end products is massive. At this rate, it makes more sense to get into the Chinese market than not.
The story of what Chinese consumers are willing to spend for foreign products gets even sweeter. Currently, China’s e-shoppers spend a giant 176% more per purchase when buying from overseas companies than domestic ones. This doesn’t just extend to luxury products, but also to baby products, foreign wines and alcohol, and even health supplements, which are seen as much higher quality than Chinese equivalents of the same kinds of products.
Explaining the Chinese E-Commerce Market
There are many other factors contributing to the growth in the Chinese e-commerce market. For starters, Chinese consumers are eager to “trade-up” to foreign products that aren’t produced in China. Specifically, they are looking for niche, often country specific products that traditional retailers don’t carry. Think maple syrup or swiss chocolate - products that are famous for their quality and distinctly from a particular place. These kinds of products sell for a huge premium, sometimes double the price you would pay in western countries.
Another reason these products are selling well online is because the e-tailers promise a high degree of quality. Despite China’s reputation for producing fake or counterfeit products, the Chinese market doesn’t want to purchase the copycats. For a long time, they simply had no alternative. The government has helped as well, creating new tax and duty laws to help reduce gray-market imports.
No Sign of Slowing Down
Not only are the markets hot and the regulations favorable, but the logistics are getting better as well. No less than eight Chinese cities have established “trade zones” which provide tax and customs benefits as well as easy access to shipping companies, making a streamlined logistics network much easier to create. Even if your business is shipping less product, there are plenty of solutions available.
At this point, it would be a shock if the digital market in China turned around. The e-commerce trend is strong around the world, but nowhere is it stronger than China. With government support, fully developed logistics networks, and a huge demand for foreign products, western businesses can’t afford to ignore this market much longer.
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