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e-Merging Market
Entering the Chinese
e-Merging Market
Danai Krokou
Entering the Chinese e-Merging Market
10 9 8 7 6 5 4 3 2 1
Keywords
Chinese e-commerce; Chinese online market; Chinese e-tail; China social
media marketing; China investment; China marketing strategy; China
marketing
Contents
Introduction������������������������������������������������������������������������������������������1
China’s E-Tail Revolution: Why China and Why Sell Online����������������5
Online Consumer Behavior in China��������������������������������������������������17
What Do They Value Most?����������������������������������������������������������������37
How to Market Your Products and Services Online�����������������������������39
The Big Two: WeChat and Sina Weibo������������������������������������������������47
How to Market on Wechat������������������������������������������������������������������55
How to Market on Weibo�����������������������������������������������������������������101
The Taobao Phenomenon: Can You Beat the Giant?��������������������������121
How to Sell Online���������������������������������������������������������������������������127
Alternative Solutions�������������������������������������������������������������������������131
Payment Methods�����������������������������������������������������������������������������135
Digital Laws and Regulations in China���������������������������������������������139
Key Strategies for Different Company Types�������������������������������������143
Managing Practical Challenges����������������������������������������������������������149
The Future of E-Commerce and Technology in China����������������������155
The Future of Chinese Retail�������������������������������������������������������������161
China Going Global��������������������������������������������������������������������������169
Final Thoughts and Recommendations����������������������������������������������175
2018 Digital China in Numbers��������������������������������������������������������181
basic tools all companies need to use if they want to do business, adver-
tise, market, and sell their products in China.
Mandarin
Mandarin is the official language of China. It was adopted nationwide
in 1932. Its pronunciation is based on the Beijing dialect and is writ-
ten using simplified Chinese characters. Whether you are in Shanghai,
Beijing, Qingdao, or Harbin, people speak Mandarin in addition to any
local dialect. This makes things much easier when it comes to communi-
cation, marketing, advertising, and doing business.
Social Media
Nearly everyone in China is not just on social media, but active on it.
In the early days of social media, this trend was very appealing to people
because social media was the only place one could connect with people
from other parts of China and the world. Over time, social media became
part of daily life. While in the West, everything happened gradually—
when social media began to take hold, users could connect with friends
and family using Facebook, search for information and the latest news
using Google, and then login to Amazon to buy things in an affordable
and fast way. In China, things happened differently. Several steps were
skipped or shortened. Everything happened within a very short time.
Platforms like QQ, WeChat, and Weibo started mushrooming and
attracted huge numbers of users by making their services more efficient
and expansive. Sites and applications included as many functions as pos-
sible and offered increasingly personalized features to keep users within
their platform. For mobile users, features were designed to keep their
phone memory and data usage at the lowest possible level. These social
media platforms catered specifically to Chinese local customs. Features
like red envelopes for Chinese New Year and quick gifts or payments to
friends took off. Platforms are constantly testing new features that can
improve the experience of Chinese users and increase conversion rates.
The voice message feature is also widely used, so people can avoid spend-
ing time to type complicated Chinese characters.
8 Entering the Chinese e-Merging Market
The growth rate of e-tail in China has doubled every year since 2003.
The increasing spending power of China’s growing consumer class is a
major driving force. From 2015 to 2025, the lower middle class in China
is expected to rise from 290 million to 525 million people. The country’s
lower middle class is currently represented by households with an annual
income of RMB 33,000 to RMB 50,000 (5,500 to 8,100 U.S. dollars).
An average upper middle class household has an annual income of RMB
41,200 to RMB 120,000 (6,800 to 19,000 U.S. dollars). Although these
figures might appear low, local price levels along with strict exchange rates
must be taken into account. Hundreds of millions of Chinese people
will experience a considerable increase in their disposable income in
the coming 10 years. What is considered China’s poor urban population
has decreased from 92 million in 2010 to 62 million people in 2018,
while households classified as rich have increased from one to 13 million.
Considering this, it is no surprise that a great number of international
companies want to enter a market with such a massive potential.
Research in 266 Chinese cities revealed that the growth of online
retail has resulted in an incremental increase in the country’s total con-
sumption. Cities with higher online consumption rates are usually the
ones with higher overall consumption. Another interesting fact is that
consumption levels used to exhibit important variations across cities, but
e-commerce is about to equalize these differences. Another interesting
fact is that there is an expanding enthusiasm for online shopping among
consumers coming from less-developed Chinese cities. Although the aver-
age revenue per person is much lower in these underdeveloped areas, the
amounts spent online will soon become similar to those spent by shoppers
from larger and more prosperous cities. This translates into a bigger wallet
share for online purchases in developing cities, and the major reason for
this is growing access to a wider variety of goods that cannot be found
offline in third- and fourth-tier cities.
Apart from increasing overall consumption and driving economic
growth, e-tail is about to shape the entire landscape of the Chinese econ-
omy in radical ways. For instance, competition has resulted in lower gen-
eral retail prices. An additional advantage is that, by driving growth to
other sectors, e-commerce has spurred the development of an RMB 84
billion (14 billion U.S. dollars) service provider industry, which e-sellers
China’s E-Tail Revolution: Why China and Why Sell Online 9
use to support their online trading activities. These services include pay-
ment systems, online marketing, advertising, logistics, warehousing, and
IT services. Another positive outcome is that the success of e-tail has had
an impact on the physical retail world. By offering a more effective retail
service, the e-commerce industry is affecting a number of other sectors
by urging traditional retailers to achieve a better coordination between
supply and demand, which, again, is going to improve efficiency for the
whole economy in the long run.
1,500
1,250 1,189.35
Transaction value in billion yuan
985.44
1,000 952.85
932.7
830.62
708.56 720.94
750 651.94
644.38
548.12
503.6
467.01
500 398.64
250
0
15
15
15
15
16
16
16
16
17
17
17
17
18
20
20
20
20
20
20
20
20
20
20
20
20
20
1
1
Q
Q
12 Entering the Chinese e-Merging Market
90%
50%
40%
0%
2012 2013 2014 2015 2016e 2017e 2018e 2019e
% Share of B2C % Share of C2C
Source: The data were calculated based on the financial results published by enterprises and
Source: The date were calculated based on the financial results published by enterprises and inter-
interviews with experts and iResearch statistical model.
views with experts and iResearch statistical model.
*GMV: gross merchandise volume
0.00 0.0%
2011 2012 2013 2014e 2015e 2016e 2017e 2018e
Source: iResearch Global Group, Fung Intelligence Center, company websites and interviews.
Following are the three main virtual store formats offered by Tmall:
1, 1% 1, 1%
1, 1%
4, 5%
Tmall.com
JD.com
25, 28% Suning.com
VIP.com
57, 64% Gome.com
Amazon.cn