In the wake of a global recession, China’s online retailing market continues to grow at an increasingly rapid pace. The trading size of the online retail market rose to nearly $37 billion, sustaining high growth throughout a tough year. At the end of 2009, internet users in China totaled 384 million, with an annual growth rate of 29%. According to the China Network Information Center (CINIC), almost one in four of these netizens have shopped online. Although the market is still adjusting to new development strategies and marketing mechanisms, companies from across the globe are hoping to tap into this booming domestic market via the worldwide web.
While e-commerce has been present in China for the past decade, new players are jumping on the bandwagon in C2C, B2C, and B2B forms. Although C2C still accounts for the largest share of the online retail market, the B2C is the main driving force of e-commerce, with an 8.7% growth rate. This is partially because the foreign firms entering China via internet are having the most success using this model.
The key to sustainable B2C sales is not only customer base acquisition, but also the quality of the customer service a company offers in addition to logistics, payment and policies. In this huge domestic market reaching consumers in rural regions can create logistical nightmares. Further, the quantities of inventory needed on hand to satisfy the potential demand can be daunting. E-commerce experts suggest that companies entering the market should focus on premium products that are exclusive and unique, rather than competing with established brands. Chinese consumers are eager for exciting foreign products and have the disposable income to buy at premium prices.
Smartdirect.cn, China’s first online supermarket, offers Western and Chinese food and household items. The one-stop shop sets itself apart from similar online vendors that sell only their brand or separate sales and logistics, which is common in the Chinese market. Smartdirect sells a diverse range of products and provides accompanied services including orders receiving, logistics and distribution, settlement of payments and after-sales service. Easier said than done, the real value from this operation comes from lean supply chain logistics. But first China’s distribution channels need to mature to meet market demand.
Another challenge in this unique marketplace is the need for a safer and more efficient online payment system to handle credit-card transactions. Cash on delivery is still a common mechanism in online shopping. However with the rapid development of new technologies, online payment tools like Alipay and Paypal are improving quickly, reducing the risks of online shopping.
While there are still some obstacles, companies entering this market now have a better shot at fostering strategic alliances and improving distribution systems in addition to obtaining first mover brand loyalty. So what is your company waiting for?