The China Ecommerce Market: Entering the Dragon

There is no denying the serious challenges to a western organization that wants a piece of China’s $2trillion and growing ecommerce market. However, companies that want to position for the realities of the 21st century should consider the China ecommerce market carefully before deciding it’s too tough.

Western media promotes the misconception that the Chinese government and unscrupulous Chinese companies are just waiting to shut down western companies with opaque regulations and IP theft. In reality, the Chinese government is doing all in its power to empower the Chinese ecommerce market as a key driver of the country’s transition from an export to a consumer economy. Also, unless you’re an iconic brand, or in possession of very sensitive and advanced technological trade secrets, Chinese companies have little to no reason to steal from you, and face ever-more-stringent consequences for doing so.

Having gotten the big misconceptions out of the way, let’s take a quick look at some of the real challenges in tapping the China ecommerce market, with strategies for dealing with those challenges.

Challenge 1: Hosting

It’s not a censorship issue – it’s an infrastructure issue. China has the biggest online population in the world, but a very undeveloped IT infrastructure to support all that traffic, especially for mobile.

This makes hosting in-country, Hong Kong not included, a must. Simple logic, but the majority of global brand sites have Chinese versions not hosted in China, and are wondering why their bounce rates are so close to 100%.

Hosting inside China’s Great Firewall requires a ministry-granted ICP number on the site to be hosted. This requires a Chinese entity to apply. If you don’t have a Chinese entity, you can piggyback with a trusted partner.

Challenge 2: Choosing a Platform

Building a big site with elaborate funnels to conversion is out-of-date for many online business models, especially for China. Driving traffic to such sites and converting it is getting harder and more expensive, as giant platforms such as Baidu, Tencent, and Alibaba buy up all the commercially oriented traffic, and set the standard for user trust.

Decentralization of a platform is key, putting localized content at point of need, be that on China’s Wikipedia, Baike, or China’s Google Docs, Wenku. The Chinese Internet is a mirror image of the West’s. The right platform is not necessarily the hottest social app, and can be found with rigorous research.

Making a business case for stand alone sales versus using a third party Chinese ecommerce platform, such as JD or Tmall, also takes research. JD can possibly take title to your goods, but limits your control of customers’ experience of your brand. Alibaba has tons of traffic, but charges commissions and places you in a very competitive selling environment. Your stand alone site, on the other hand, will convert at a much lower rate than JD or Alibaba, since visitors will most likely be unfamiliar with your site and payment gateway.

Thankfully, programmatic data can be obtained to project with great accuracy what kind of funnel flow will convert best, and even how much a sale will cost using both stand alone and third party models. Such information obviously enables best decision making.

Challenge 3: Driving Traffic and Sales Efficiently

Beware – social media is free, but requires great resources to truly engage Chinese consumers. Also, it is very hard to ‘close the loop’ and get a social media follower to buy.

Search engine marketing, primarily on Baidu, China’s Google, is actually the most efficient and scalable way to drive traffic. Only the most motivated visitors are going to enter keywords you’re bidding on, and click on your ad. Such advertising takes experience, however, not to mention an approved account with Baidu, so a trusted partner is again a must in order to take advantage.

Not that SEM is the only good tactic. Banner ads, content marketing, and other approaches successful in the West can be used to great effect to succeed in the China ecommerce market. The key is to take advantage of the programmatic data that is available, but that few companies are availing themselves of. For example, Alibaba can be programmatically scraped to find out everything about an industry – best selling products, price point, key competitors, buyer profiles, and more.

So while the challenges in entering the China ecommerce market demand careful consideration, they are much more easy to address and plan for than a physical China distribution plan. The time has never been better to ‘enter the dragon’ online!

Ernie Diaz is producing and distributing content on China Digital Review, an online magazine analyzing China's digital trends for western companies.