Online marketplaces dominate
80% of online orders in China are done through marketplaces like Taobao, JD, Koala, AliExpress and Tmall. So market entry sounds easy right? Wrong! Getting set up on these marketplaces takes considerable time and money. There's a lot of paperwork, deposits are typically required and then there's setting up your store. You also need to build your infrastructure from a logistics and IT perspective. Then there's the ongoing maintenance and customer support, not to mention marketing. Even well known brands will need to be seen.
Getting your marketplace strategy right can be rewarding, but it will take time, money and expertise.
The political environment needs watching
The central Chinese government rules local-business operations, which poses high political risk, thus causing difficulty for foreign companies seeking to enter the Chinese market.
However, currently the government is encouraging e-commerce, with their National Strategic Plan for Rural Vitalization project being a prime example. Here the Chinese government is encouraging growth in the countryside - a large untapped market - through investment in infrastructure and technology.
Intellectual-property law is not well developed in China and this leads to fierce competition from local, low-quality and low-cost manufacturers in certain sectors and “Copycatting” is commonplace.
Premium products are bestsellers
Luxury goods are one of the most popular foreign imports in China as a lot of consumers like to show off their wealth by buying foreign brands. There are a lot of counterfeit products in China, and as such, 61% of Chinese consumers are willing to pay more for designer goods that are imported from their origin country. An advantage these brands have is they are usually well established and used to investing millions in marketing.
A lot of pregnant women in China also like to buy milk powder and vitamins online, so ecommerce sites in the pharmaceutical industry do well to distribute their products in China.
Investment in building a trusted brand is key
In Chinese culture, the default position tilts towards distrust, so foreign brands need to invest significant budgets in marketing. Few retailers have success with their own websites - they rely on marketplaces - and typically those that do are well known international brands.
Even then, they will have invested many thousands/millions of pounds in Chinese ecommerce platforms with local language sites and payment options, as well as Chinese social media marketing: WeChat (Chinese Facebook+), Sina Weibo (Twitter of China), Tencent QQ (Popular Instant Messaging App), Toudou Youku (Youtube of China), and Baidu Tieba (a Search Engine Forum).