Ecommerce is on the rise all over the world, thanks to factors like increasingly accessible technology and advancements in order fulfillment methods. But not all markets are growing evenly. Over the past three years, U.S. ecommerce has experienced a compound annual growth of 13.6 percent. In comparison, ecommerce in China has experienced at a compound annual growth rate of 38.1 percent. This makes it both the largest market in the world at $830 billion, and the fastest-growing.
Clearly, this development will have major implications for international online retailers as China’s market continues to develop. This quick guide to Chinese ecommerce will touch on some of the most exciting aspects of the present market and potential opportunities for sellers as we move into the future.
China Is Experiencing an Upgrade in Consumption
It’s important to understand China is currently undergoing a trend known as a “consumption upgrade.” This entails consumers spending more in categories like cosmetics, clothing and food. The people are spending more money and they’re seeking higher-quality items. According to World Economic Forum, two major factors are triggering this ongoing consumption upgrade: disposable incomes rising and a shift toward cross-border ecommerce. Specifically, Chinese consumers are now more willing to shop international online stores for high-quality, niche items.
Overall, customers in China seem to be seeking products that support healthier lifestyle choices. They are also seeking a more personalized experience—rather than buying mass-market products, there is a renewed interest in “products and brands that better fit their personalities.”
Mainstream retailers have traditionally dominated ecommerce in China, but this is changing right along with consumers’ preferences. Niche brands may find success fulfilling these more specialized wants and needs. Furthermore, the potential for niche loyalty is high when customers feel like a brand is a good fit with their actual and aspirational lives. Knowing this, brands can fine-tune their marketing and sales tactics to capture subsets of what has traditionally been a broader target audience.
Sales Are Growing in Low-Tier Cities and Rural Areas
Even just a few years ago, many rural villages and small cities in China had limited or no access to the courier services needed to facilitate deliveries. But due to increased costs of living, more people are moving out of Beijing, Shanghai and Shenzhen. The result? “Lower-tier cities will be bigger, wealthier, and more eager to spend, and could contribute two-thirds of incremental growth in national private consumption toward 2030,” according to Morgan Stanley’s chief China economist.
Furthermore, China has invested in telecom advances enabling more people to access the internet. While rural and low-tier city internet usage is lower than in major cities, it’s still on the upswing, thanks to expanding fiber optic cable networks around the country.
Increasingly, consumers can travel shorter distances to designated pick-up points, enabling even rural shoppers to order products online. As disposable income rises, these consumers turn toward the convenience of online shopping compared to the relative difficulty of driving a long distance to a shopping center.
However, tapping into this trend means international retailers must make sure their ecommerce platform is accessible in terms of functionality and payment processing. The best website builder for ecommerce must integrate with popular payment gateways and apps.
For example, a platform that integrates with WeChat, a popular social app in China with more than 800 million monthly users, will help you accept integrated payments without hassle. In turn, this will reduce the risk of shopping cart abandonment due to incompatible systems. Nearly one-third (31 percent) of WeChat users in China initiated a purchase using this app in 2016—double the figure from the previous year. This is a testament to the growing power of conversational commerce, which entails meeting buyers where they already are to facilitate one smooth purchasing funnel. The less consumers have to do to complete a transaction, the more likely they are to initiate and complete it.
Above all, user experience is key, and your choice of ecommerce platform sets the tone here. It’s important to keep up on the latest in flexible payment options, and cybersecurity measures so your store remains competitive in both a domestic and an international capacity.
Challenges Associated with Cross-Border Ecommerce
As it stands, retailers do face challenges specific to international retail. In particular, order fulfillment tends to become more complicated. To make this endeavor worthwhile, sellers should carefully consider various challenges ahead of time. Examples include:
- Possible global shipping delays
- Inventory management issues
- Packing for long-distance transit
- Implementing responsive tracking tools
- Adhering to customs regulations
Merchants have a few options when it comes to order fulfillment. You can manage this process in-house, especially if you’re a fledgling company. This means you’ll be responsible for processing orders, printing labels, packing boxes and sending out your merchandise. Alternately, you can drop-ship, meaning the product departs directly from the manufacturer or distributor without bouncing to you in between. You can also work with a third-party logistics provider (3PL) or fulfillment center. As companies grow, they tend to pursue this option because there’s a higher risk something will slip through the cracks trying to tackle it in-house.
Whichever fulfillment strategy you choose, it’s important to spell out order fulfillment options for consumers on your website before the last step of checkout. This is important for domestic orders, of course, but especially so for international ones. Consumers want to know how fast they can get their products and how much it will cost before they click ‘Confirm Purchase.’
Long story short: Taking full advantage of the growing ecommerce market in China means retailers must optimize both their ecommerce platforms and their order fulfillment practices. This is only a quick guide to the complex world of Chinese ecommerce, but it illustrates a few promising trends: greater disposable income, rising internet accessibility throughout the country, a turn toward niche lifestyle purchases and greater overall potential for revenue for merchants savvy enough to tap into them.