E-Commerce: China’s Online Market Places

One of the main questions asked by importers is where to find and procure cost-effective products in China. This article answers that, while also giving a broad introduction of China’s online marketplace.

China’s online marketplace is much more developed than the retail market. Many Westerners are familiar with some of the current most top Chinese e-commerce sites (Aliexpress and Alibaba are some of China’s largest online marketplaces). However, there are other Chinese e-commerce sites used for a variety of different purposes.

China’s online market can be broken into several different categories. The first is B2C (business to consumer), where companies sell directly to buyers, forgoing a middleman. Alternatively, there is B2B, which refers to businesses selling directly to other businesses. Lastly, there is also C2C, which refers to customers selling to customers, as seen on marketplaces such as EBay.

 

China E-Commerce: Market Outlook

Despite China having a rather turbulent year in 2017 economically, and a fiscal policy rife with wastage, the China’s online marketplace continued to grow. To put its growth in perspective, one only needs to look at sales figures and see that China accounted for the largest e-commerce companies, which is over 40% of the world’s retail e-commerce sales during the year.

The total market for e-commerce worldwide is being estimated at $1,9tn. This amounts to over 8% of all world commerce. It is thus easy to see why so many businesses are entering this market. Something interesting to note is that in developed Western countries (like France and the USA), m-commerce (mobile commerce) accounts for around 20% of total e-commerce sales, whereas for e-commerce in China, the figure is almost 50% and expected to rise to 70% by 2019. This growth suggests that China is ahead of the curve in this aspect, and while the overall economy is showing signs of slowing, but China’s online shopping dominance is not.

Compared to the overall market of China, side-commerce in China has really exceeded expectations. In 2016, the China’s e-commerce market was estimated to be $700bn representing 15.9% of total retail sales and an overall $4.23tn market. It is expected that it will reach almost $800bn in 2017.

 

China E-commerce: Mobile shopping on Alibaba Mobile commerce – already a very common thing in China.

 

Current China E-Commerce Websites

Many people have heard of two of the largest Chinese e-commerce websites Alibaba and Aliexpress; but most do not realize these companies are part of a larger conglomerate called Alibaba Group, is affiliated with many different websites.

By having a wide range of dominant sites focused on different niches, they are able to capture the majority of China’s e-commerce market size. For example, Alibaba is useful for those looking to source Chinese online retailers for products, whereas Aliexpress is suited for ordering personal quantities (often the same products).

The Alibaba (and 1688.com) model introduces a new dynamic and allows for a more personalized manner of negotiations—effectively reversing the sourcing process through an auction process where suppliers bid to meet buyers’ requests.

Another member of the Alibaba Group is one of China’s largest e-commerce companies, Tmall.com, which focuses on the B2C sector. It provides branded goods to citizens of China, Hong Kong, Macau, and Taiwan. It is similar to Amazon, and has a wide range of quality brands. According to China’s e-commerce statistics, it dominates the B2C market in China with a 51.3% market share. The Alibaba Group also owns Taobao—the largest consumer to consumer shopping platform in China.

 

China E-commerce: Alibaba is the dominating the scene Alibaba’s listing at New York stock exchange.

 

However, the E-commerce market in China has many key players beyond the Alibaba Group; firstly JD.com is one of China’s largest e-commerce companies, which retail B2C websites in China in terms of transaction volume. Additionally, Amazon.cn, which dominates many Western E-commerce markets, is also very popular. Another popular e-commerce site is Dangdang, which originally started out similar to how Amazon did in the USA, by selling books.

Some other popular platforms in China are 360buy.com, banggood.com, and DHgate.com. These are more focused on B2C sales, but small-scale importers can find some valuable information and sometimes suppliers here.

What can be seen is there are a variety of effective websites concentrating on e-commerce, with Alibaba clearly dominating this field in respect to services provided for large-scale importers. As e-commerce to continue to grow in popularity, other websites may claim a larger market share depending on their focus areas. As can be seen, the significance of e-commerce in China is a crucial factor for anyone interested in entering the market.

 

Dealing with Factories in E-Commerce

It should be mentioned that the entities dealt with are still mostly Chinese factories, often through trading companies. As stated in previous articles, specifications and negotiations should be clear and to the point, leaving no room for ambiguity. Heading this advice should ensure a smooth transition into the e-commerce realm.

One also needs to remember that to factories, their online sales are mostly a newly acquired outlet. This does not, however, mean that they will not be giving it their attention. Factories have teams managing their sales channels. These teams are not always subject matter experts though, but they can get you a foot in the door for building a great relationship between you, the importer, and the factory. It will require that you take these first conversations seriously and clearly indicate that you are serious about business.

Know exactly what you are looking for by researching it beforehand. Sales staff does have access to catalogues, but not exact product knowledge. In many cases they will give the impression that they do, and playing along will soon gets you labeled as an inquisitive person with no real commercial intentions. Communicate, get a small order placed, or get referred to a knowledgeable person. With these channels, acting larger than you are, will also get you the needed attention just be sure to follow through.

 

Conclusion

Online commerce is growing at a rapid pace as are the marketplaces facilitating this. Excellent opportunities can surface and long-lasting relationships can be built through these platforms.  By having the correct background knowledge such as Incoterms and entering with the right attitude, you can succeed.   

About the author

Jan has an intimate knowledge of strategic planning and operations management he acquired in the German military and in academia. Having graduated from Peking University, he possesses an acute knowledge of the Chinese economy. Jan routinely consults on short and medium term company strategy and is currently working on the company’s 3 year plan.

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