A huge number of analytical reports have been written about China’s e-commerce market and its rapid growth. The world’s largest e-commerce market has demonstrated steady growth over the past seven years, and its potential is enormous. It is therefore unsurprising that many foreign companies want to gain access to this market. In fact, thousands of foreign brands are already operating in it.

The popularity of imported goods in China and the development of e-commerce also create opportunities for companies from Russia. There have not yet been many success stories. The main reason is often said to be a lack of understanding of the market and local consumers among Russian entrepreneurs. Operations are also complicated by a number of factors: local legislation, logistics, certification, working with marketplaces, product promotion and others. It is important to understand that working with a promising market such as China requires investment of resources and often a reliable partner.

Recently, international consulting companies Frost & Sullivan and Azoya Consulting published a joint study on opportunities for international e-commerce in China.

The study surveyed more than 1,000 Chinese residents who frequently shop at foreign online stores, as well as 100 foreign brands and retailers with annual revenue exceeding USD 5 million.

1. Key Findings of the StudyThe number of people shopping online in China has reached 500 million.
2. In 2018, the size of China’s e-commerce market will exceed USD 1 trillion.
3. 80% of foreign retailers consider China the most attractive market; 90% of retailers plan to increase their online sales in China.
4. Foreign retailers are dissatisfied with Chinese marketplaces such as Taobao, JD.com and others.

Online Shopping in China and on Foreign WebsitesAt the time of publication, the number of internet users in China had reached 733 million, while 500 million Chinese consumers shop online. Clearly, the size of China’s e-commerce market is enormous.

The number of internet users in China is greater than the combined number of users in the United States, the United Kingdom and Australia. However, online shopping accounts for only 16.6% of China’s total retail sales, lower than in the United Kingdom. PwC analysts, citing Goldman Sachs, expect that e-commerce will account for 25% of China’s total retail sales by 2020.
China’s e-commerce market is not only the largest but also the fastest-growing in the world. Online sales in China account for almost half of global online sales.

The chart below shows that China’s e-commerce market amounted to just USD 120 billion in 2011, while by 2018 it had reached USD 1.12 trillion, with annual growth of 40%.

As for future spending, 63% of survey participants said they would spend more money online over the following 12 months, while 33% said their spending would remain unchanged.

Preferences of Chinese ShoppersFor 67% of Chinese consumers, the main reason for shopping at foreign online stores is better product quality; for 45%, it is the lower risk of buying counterfeit goods. The most popular product categories among Chinese shoppers are clothing, cosmetics and everyday consumer goods.

It is important to note that online shopping for Chinese consumers is more than simply spending money. It is entertainment, discovery and interaction with friends, celebrities and opinion leaders. BCG analysts found that Chinese consumers spend 30 minutes a day on Taobao.

Another important trend is so-called mobile e-commerce. The South China Morning Post forecasts that three-quarters of online purchases by Chinese users will be made using mobile devices in 2018.

The most popular brands among Chinese consumers are Japanese (72%), followed by Korean (60%) and American (55%) brands. Chinese shoppers trust Japanese stores the most, followed by American and Korean stores.
When purchasing foreign goods online, Chinese consumers prefer domestic marketplaces, followed by international marketplaces, purchasing agents (Daigou) and independent companies’ online stores.

Chinese consumers shop both on Kaola, Taobao, JD.com and on international platforms such as Amazon and Rakuten.

The main criteria for men when choosing an online shopping platform are the variety of payment options, delivery speed to China and website speed. For women, the main criteria are the variety of payment options, website speed and Chinese-language customer support.

Strategies for Increasing Online Sales in ChinaThe internet is the main channel for companies seeking to increase sales in China. More than three-quarters of the foreign retailers surveyed said that they currently sell their products to Chinese consumers online. 41% of companies plan to develop only online sales channels, while 18% plan to develop offline channels as well.

The most obvious problems faced by foreign retailers include changes in Chinese government policy toward e-commerce (30%), intense competition (30%), excessively high initial costs (21%) and inability to generate profits (18%).

The main sales channels for foreign retailers are offline stores (35%), Chinese marketplaces (32%), international marketplaces (18%) and branded online stores (15%).

The main marketplaces in China are Taobao and JD.com, although foreign retailers’ satisfaction with these platforms is relatively low.

Foreign retailers entering China’s online market for the first time usually begin with Taobao or JD.com. However, because of high commissions, intense price competition and the lack of direct communication with customers, more and more foreign retailers subsequently create separate Chinese-language websites to attract customers directly and increase profits.

Opportunities for Russian BusinessThe growing number of people shopping online, annual growth of 10% in online shopping expenditure — in 2017, a Chinese consumer spent USD 1,300 per year — the introduction of new technologies and other factors confirm the prospects for further development of China’s e-commerce market.

The experience of foreign companies and our own experience show that entering this market is realistic, but requires certain investments and preliminary work: brand protection, market analysis, strategy development, partner selection, product promotion and other measures.
China is highly attractive, but succeeding there requires effort. The road is mastered by walking it.

Our experienced team at Eurasia Development Ltd is ready to help you implement a project to enter China’s e-commerce market with minimum costs and maximum efficiency.

We will be glad to answer your questions and discuss cooperation. Please contact us at info@ed-innovative.com.