9 MINUTE READ | February 21, 2018
Who are China’s E-Commerce Titans?
With PMG actively running global client campaigns in over 50 countries, we want to dive into China’s powerful E-Commerce titans while exploring how brands can strategically research and enter the market.
China’s E-Commerce industry values at 1.4 trillion yuan with 25% expected growth by 2020. It also accounts for 40% of global E-Commerce sales and its mobile payment activity is 11 times greater than the United States’. As outlined by eMarketer in the latest worldwide retail forecast, China is the world’s biggest E-Commerce market “with a significant lead on other markets including the US ($450.81bn), UK ($110.07bn) and Japan ($95.33bn)”. The trend is predicted to continue as the convenience and ease of online shopping becomes more accessible to everyone. The country’s E-Commerce growth has enabled foreign brands to enter China without the need to establish a physical presence.
However, one thing to keep in mind is that while the E-Commerce market is rather appealing, a high level of entry exists for brands unfamiliar with the complexities of APAC and Chinese markets. Because the market is so fiercely competitive and, in some areas, over-saturated, constant innovation and cultural relevance are also needed to help keep your brand top of mind with Chinese consumers. Not to mention the complications of actually entering the Chinese market due to governmental regulations and media restrictions – from creative and strategy to campaign activation.
Luckily, some PMGers, speaking as consumers and marketers, are willing to share a few tricks of the trade in helping brands understand China’s E-Commerce market and lay the foundational knowledge needed for a possible APAC market entrance.
Within the country’s E-Commerce ecosystem, the three titans are Alibaba-owned Taobao and Tmall, and JD.com. At first glance, the sites may appear similar, but the role each plays in the lives of Chinese consumers are vastly different.
Searching for Jeans on Taobao, average price $18-$22
Taobao is the most widely known E-Commerce site domestically and globally. Mainly operating through a C2C business model where Taobao acts as an intermediary for the sale of goods and services between consumers, Taobao is essentially a platform intended for individuals looking to start an online store and grow their business. Think of Taobao as China’s eBay.
Taobao is great for users looking for cheap alternatives to shoes, clothing and other apparel, but it is also problematic due to the abundance of counterfeit goods. Users can often find the same product in varying price ranges. While the Taobao marketplace is a great way to find good deals, truthfully, it may not be the ideal platform for big brands, especially those with luxury product offerings, looking to launch their E-Commerce presence in China.
Tmall, the sister company of Taobao, and JD.com have the largest market shares when it comes to B2C, with Tmall dominating at 51% while the latter holds 32%.
By enabling businesses to sell their products as an organized entity, Alibaba’s Tmall works as an alternative, verifiable E-Commerce platform; securing trust with consumers and facilitating profits for brands. In fact, when consumers are shopping specific brands or luxury items online, they often look to Tmall to ensure the authenticity of the product they are purchasing (unlike Taobao, where fake goods plague much of the site).
Gap 70% off promotion for Chinese New Year on TMall
Equally important is JD.com, China’s closest counterpart to Amazon. It has its own inventory and can handle fulfillment of the direct sales to consumers. JD.com also allows third-party merchants to sell and promote their products on the site. The company’s revenue is mostly earned by marking up products sold to consumers. Similar to Tmall, Chinese consumers primarily use JD.com to ensure the authenticity of the product they are purchasing. IMO: Oftentimes, prices on JD.com are more expensive than Taobao but a bit cheaper than Tmall.
iPhone8 on JD.com. Note that iPhone 8 cost $920 vs $699 in the US
The main difference between Tmall and JD.com is that they target different markets. Tmall is predominantly used to purchase clothes, cosmetics, and shoes while JD.com is the number one choice for home appliance and consumer electronics purchases. Depending on what types of goods you sell, Tmall or JD.com may be a better fit for your brand than the other when determining which E-Commerce site will allow you to reach the right Chinese shoppers. It is also important to specify that JD.com will store, fulfill and deliver products for brands, but Tmall leaves those responsibilities up to the brands as it is only an online marketplace.
Selling on China’s E-Commerce site is extremely competitive due to the abundant options offered to consumers. Getting your products on a platform won’t guarantee sales as most consumers must hear about you before they search for your brand on Tmall or JD.com.
Below are three ways you can gauge your brand’s popularity in China via China’s social media and Taobao before making the decision to kickstart your brand’s E-Commerce presence.
Daigou is a trend in China where people living abroad bring back goods during their trips to China and sell them on C2C marketplaces like Taobao. Daigou can be a great indicator of your sales potential in China and by checking your brand search volume on Taobao, you can get a good sense of how successful your brand could be on Tmall or JD.com. Taobao also has user forums where consumers review brands and products purchased, as well as make recommendations. This can give companies insight into consumer sentiment as well as the conversations occurring around their brand.
The WeChat Index, launched in March 2017, is another great indicator of Chinese consumers’ awareness of a brand. It tracks trending keywords, such as your brand and its variations, in 7-, 30-, and 90-day segments. Even though it can show data outlining the volume of conversations taking place about your brand, it can be meaningless when analyzed independently. A good alternative and to add context is to also search your competitors on the index to gauge your relative popularity.
Tencent, the parent company of WeChat, holds a 44% stake in Sogou Search and as a result, has made it possible to search WeChat’s social content; enabling brands to explore who is talking about them, what they’re talking about and how many other users that content has reached. To get started, you can search your brand here.
A cool opportunity to build your brand’s awareness is during the best sales day of the year: Singles’ Day. While Singles’ Day officially lands on November 11th of every year, brands usually start their promotions as early as November 1st. Over the day’s 24-hour shopping bonanza, consumers bought over 168.3 billion yuan ($25.4 billion) in goods across Alibaba’s E-Commerce properties, Taobao & Tmal, in 2017. Newer brands should look to start promotions as early as possible given the hyper-competitiveness of the Holiday. Singles’ Day is the optimal moment for letting consumers discover your brand and building a loyal following.
From the consumers’ side of things, my experience with Single’s Day is that it is rampant chaos. If you thought Black Friday in the United States is madness, Single Day is madness times 5 in China. Not only does it occurs within 24 hours online, you are also competing with 1 billion-plus shoppers for the same product. If your internet connection is poor, then I bid you good luck because your ability to purchase is zero. To ensure a successful shopping experience, several preparations must be made!
You can research for products available for pre-sale and place a deposit to secure the deals.
Employ a smart strategy by browsing your favorite brands every week and add them to your cart so you can immediately go to check out when November 11th arrives.
Get plenty of sleep the night before, so you have the energy to shop when it hits 12:00 am. The Internet tends to be a bit faster during off hours when people are asleep.
If you have any questions regarding specific products, ask the shopping agent ahead of time because they will be too busy to answer you during double eleven.
Don’t be slow. Know what you want and make the purchase, don’t browse too much or the product may be sold out by the time your decision is made.
Although these preparations seem tedious, they are worth the effort because the deals are incredible – as items can go as far as 90% off retail price. The actual sales are a mystery until November 11th, but it is expected that majority of brands will have very good deals. For me personally, tech is the main product category I look for when double eleven arrives. I tend to look for items that don’t go on sale as often and Single’s Day ensures the best deals possible. The vibe of this special holiday is really to let yourself go and just go mad on purchases because you won’t find the same deals at any other time of year.
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As you can see, entering the Chinese market takes months of preparation and calls for the creation of a tactical strategy to ensure optimal success. While the learning curve is steep, the payoff can be monumental and we hope you’ve learned something from these insights that have strengthened your foundational understanding of China’s E-Commerce Titans.
Posted by: Luoman Huang
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