By Nick Henderson.

China’s e-commerce marketplace is booming. Online sales surpassed the US$1 trillion mark for the first time in 2017, with the sector set to generate more than US$1.7 trillion by 2020.

Already the largest market globally, Chinese e-commerce now accounts for about half of the world’s online sales. To put this into perspective, in 2006, there were about 34 million Chinese online consumers. By 2016, population numbers had soared to 467 million, representing a 14-fold increase over 10 years. 

Driven by rising disposable incomes, greater internet connectivity, and a growing emphasis on product quality, health and safety, this remarkable transformation is set to continue. In addition to global names such as Alibaba’s Tmall and JD.com, smaller and more specialist players, such as Kaola, VIP.com, YangMaTou, Little Red Book and others, are taking on a share of the growing market.

It’s a dynamic, fast-moving and integrated ecosystem, connecting savvy consumers with highly innovative online marketplaces and payment platforms. 

Understanding China’s online consumers

According to Nielsen’s online shopper trend report, the proportion of Chinese consumers who have made a cross-border e-commerce purchase reached 67% in 2017 from just 34% in 2015.  

During the popular annual shopping festival known as Singles Day in November last year, e-commerce giant Alibaba saw RMB168 billion (A$35 billion, NZ$38 billion) in sales and 39% growth on the previous year, while its main competitor, JD.com, achieved RMB127 billion (NZ$29 billion, A$27 billion) with more than 50% growth year on year. It took just two hours for Australian vitamins maker Blackmores to exceed its previous year’s e-commerce sales.

So who is shopping?

China’s online ecosystem is diverse and dynamic – just like the shopping habits of its more than half a billion online consumers. A typical online consumer is slightly more likely to be female, aged in her 30s–40s, and from a ‘tier–two’ city, a major urban hub outside Beijing and Shanghai. However, online shopping penetration rates are such that consumers from all over the country are actively shopping using a myriad of platforms and online channels.

The typical online shopper will also be one of about 500 million Chinese consumers who prefer to shop via mobile phone. She will do extensive research before making an online purchase, including potentially checking out items in-store, and reading reviews and endorsements on social media. Not surprisingly, price is not the most important factor in driving online sales, with brand recognition and product quality and safety coming in top place. 

Online shopping has enabled Chinese consumers to have access to a world of product choice and they now have some of the broadest product range choices in the world. High-quality fashion, premium food and health care, cosmetics and baby and maternal products are all among the most sought-after online consumer goods.

ASEAN is working to become a common market, which presents new opportunities for Australasian businesses.

Navigating online marketplaces

With the recent arrival of two of the largest Chinese online retailers, Alibaba (the owner of Taobao and TMALL) and JD.com to Australia, an increasing number of exporters – especially small and medium enterprises that do not have a physical presence in China – can now directly sell their products to Chinese consumers. 

Alibaba, for instance, opened its flagship Australian office in 2016. More than 2000 Australian SMEs have now signed up to Alibaba’s e-commerce platforms, such as Tmall Global. Most of these small and medium exporters are selling to China for the first time. Both Alibaba and JD.com enable retailers either to set up their own online flagship stores or shopfronts, or alternatively, sell their products in one of the existing ‘supermarkets’ or ‘umbrella stores’ within these online platforms.

Numerous Australian brands such as Swisse (with its own flagship store) and subsidiary Chemist Warehouse (an umbrella store for other brands selling online) are already using these platforms. However, as cold chain logistics and transport improve, new opportunities may emerge for Australian fresh foods such as dairy, meat and fruit and vegetables.

Picture caption: Workers prepare packages for delivery at a sorting center in Lianyungang, Jiangsu province during the Singles Day online shopping festival.

STR/AFP/Getty Images

Choosing Chinese partners

For new exporters entering the online sales landscape, it is common to engage a certified trusted partner (TP). A good TP can provide a one-stop solution to manage a brand’s entire e-commerce operations, or oversee certain parts of it. 

They will perform tasks on behalf of the store owner ranging from set-up and registration to design, product marketing, customer service, and operational support. TPs typically charge a fixed fee monthly retainer, a percentage commission of sales or, as in most cases, a combination of both. With this they take a risk on the client’s sales, but are also encouraged to focus on long-term brand development and the client’s success.

New payment platforms

Another tricky area for newcomers is the different e-commerce payment platforms. 

For instance, Alibaba’s Tmall (and Taobao platform) uses Alipay, while JD.com retailers accept payments via JD Pay. Through its partnership with Tencent, JD.com also benefits from a headline spot on Tencent’s WeChat app, and access to payments via WeChat Pay/Tenpay.

These payment options are increasingly becoming mainstream as Chinese consumers embrace cashless options. For example, about 25,000 taxis in Australia now accept Alipay to cater to the 1 million-plus Chinese visitors each year.

And retailers such as Chemist Warehouse have recently begun issuing Alipay coupons to Chinese tourists during peak periods such as the Lunar New Year.

Over the Tasman, more than 400 New Zealand brands are also on the Alibaba.com platform.

Knowledge is power

Navigating China’s changing e-commerce landscape may seem like a daunting prospect for small and medium exporters, as well as for the professional services businesses that support these enterprises. According to a recent survey released by Westpac, only 16% of Australian businesses already operating in China have a detailed strategy for China’s e-commerce market. More than 60% of businesses surveyed say that understanding Chinese consumers is their number one “information gap”.

As with other considerations when it comes to e-commerce, China is a highly complex, dynamic and nuanced marketplace. China’s internet and e-commerce giants are at the forefront of global innovation and emerging technologies. And as they continually expand their networks and platforms throughout Australia, Asia and the world, this complex and dynamic ecosystem is becoming a global phenomenon. 

So it’s never been more critical to bridge these knowledge gaps. Arming yourself with customer-centric insights and an understanding of these evolving online marketplaces, consumers and payment platforms will be critical to riding the e-commerce wave. 

A surprising number of Australia’s top business leaders are yet to develop the skills needed to seize opportunities in Asia, according to a new Asialink Business study.

Nick Henderson is the Director of the China Practice at Asialink Business, Australia’s National Centre for Asia capability. He works with organisations of all sizes to help them understand, enter and grow in China. 

Main picture: STR/AFP/Getty Images