E-COMMERCE IN CHINA A GUIDE FOR AUSTRALIAN BUSINESS - JUNE 2015 - Austrade
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E-COMMERCE IN CHINA A GUIDE FOR AUSTRALIAN BUSINESS Using ChAFTA to sell premium Australian products JUNE 2015 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 1
DISCLAIMER
This report has been prepared as a general overview and is intended to be a guide, providing a
starting point for exporters. It is not intended to provide exhaustive coverage of the topic. The
information herein is made available on the understanding that the Australian Trade Commission
(Austrade) is not providing legal, financial or any other form of professional advice. Therefore, while
all care has been taken in the preparation of this report, Austrade does not accept responsibility
for any losses suffered by persons relying on the information contained in this report or arising
from any error or omission in the report. Any person relying on this information does so entirely
at their own discretion and risk. Austrade strongly recommends the reader obtain independent
legal, financial and any other form of professional advice prior to acting on this information.
Austrade assumes no responsibility for any company, product or service mentioned
in this document, for any materials provided in relation to such products, nor for any
act or omission of any business connected with such products and services.
Currency conversions from Chinese Renminbi to Australian dollars ar e historical
and should be considered indicative only. The Reserve Bank of Australia provides
data on current and historical Australian dollar exchange rates with major currencies
at http://www.rba.gov.au/statistics/frequency/exchange-rates.html
Austrade gratefully thanks the e-commerce marketplaces and experts who provided information
for this report and acknowledges the assistance and contribution of Dezan Shira and Associates.
Copyright Commonwealth of Australia 2015
Publication date: June 2015
2 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS
CONTENTS
FOREWORDS 04
MINISTER FOR TRADE AND INVESTMENT
MINISTER FOR SMALL BUSINESS
EXECUTIVE SUMMARY 06
INTRODUCTION 10
THE E-COMMERCE MARKET IN CHINA
DRIVERS OF GROWTH
UNDERSTAND CHINA’S ONLINE CONSUMERS 12
WHO IS BUYING GOODS ONLINE AND WHY?
WHAT IMPORTED PRODUCTS ARE ONLINE SHOPPERS LOOKING FOR?
GET YOUR PRODUCT READY FOR THE CHINESE MARKET 19
PRICING
PACKAGING
UNDERSTAND CHINA’S ONLINE MARKETPLACES 22
ONLINE MALLS
HYPERMARKETS AND SPECIALTY MARKETPLACES
CONSUMER-TO-CONSUMER: ONLINE BAZAARS AND SOCIAL SELLING
FLASH SALES
STAND-ALONE E-COMMERCE WEBSITES
PROTECT AND MANAGE YOUR INTELLECTUAL PROPERTY 29
IDENTIFYING IP VIOLATIONS
REGISTERING A TRADEMARK
REMEDYING IP VIOLATIONS
GET YOUR GOODS TO CHINA 30
CROSS-BORDER SALES
CONVENTIONAL DISTRIBUTION
ONLINE VERSUS OFFLINE: MARKET ENTRY FOR AUSTRALIAN FOOD
SALES VIA THIRD PARTIES
DISPATCHING YOUR GOODS IN CHINA
E-COMMERCE MARKETPLACES WITH INTEGRATED LOGISTICS
THIRD-PARTY LOGISTICS PROVIDERS
STORAGE, WAREHOUSE AND ORDER FULFILMENT
COLD-CHAIN LOGISTICS
REVERSE LOGISTICS
UNDERSTAND KEY REGULATIONS 40
PRODUCT REGISTRATION, INSPECTION AND QUARANTINE PROCEDURES
TARIFFS, DUTIES AND OTHER REGULATORY PROCEDURES
COMPANY TAXES
CHINA’S CONSUMER PROTECTION LAWS
ESTABLISHING A LEGAL ENTITY IN CHINA
CHINA-AUSTRALIA FREE TRADE AGREEMENT 45
SECURED OUTCOMES
AUSTRADE CHAFTA OUTREACH PROGRAMME
BUILD AND MANAGE YOUR ONLINE BUSINESS 47
BUILDING A SHOPFRONT
GETTING PAID
ATTRACTING AND RETAINING CUSTOMERS
COMPANY WEBSITE
ONLINE ADVERTISING
MARKETPLACE PROMOTIONS
SEEKING ASSISTANCE 55
HOW AUSTRADE CAN HELP
AUSTRADE IN CHINA
WHAT IS EMDG?
EFIC
THIRD-PARTY SERVICE PROVIDERS 57
USEFUL TERMS: FROM ALIBABA TO ZHUIZONG 62
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 3
FOREWORD BY MINISTER
FOR TRADE AND INVESTMENT
THE HON Selling products in China via an
online marketplace is a relatively
ANDREW ROBB AO MP easy, low-cost and low-risk
alternative for Australian exporters.
MINISTER FOR TRADE
AND INVESTMENT In 2014, China’s online retail market
grew by 50 per cent to reach the
equivalent of half-a-trillion Australian
Since concluding the landmark dollars1, creating vast possibilities
China-Australia Free Trade for our home-grown businesses.
Agreement (ChAFTA), the
government has been focused on Access to comprehensive,
ensuring Australian businesses – unbiased information and in-market
large and small – understand how assistance is vital to success
to make the most of the enhanced in China’s e-marketplaces, so
access the agreement delivers this E-commerce in China: A
in this lucrative Asian market. Guide for Australian Business
is an invaluable resource.
Australia’s high quality goods and
services are in strong demand in Produced by Austrade, the guide
China – particularly among the explains in simple terms how
rapidly growing middle class – China’s e-marketplaces work
and given ChAFTA provides the and how to access them. Other
best market access any foreign practical information includes
country has achieved to date, the explanations on market regulations
openings Australian businesses and export pathways, how to
can seize upon are significant. manage an online store, managing
intellectual property, as well as
In fact, on full implementation of profiles on Chinese consumers
the agreement, 95 per cent of and Australian companies already
Australian goods exports to China enjoying success in Asia.
will be tariff free, which is why it’s
important that businesses are The export opportunities into China
equipped with the right know- are certainly there for the taking and
how to take full advantage of the this guide, along with Austrade’s
opportunities which includes an network of contacts and market
understanding of e-commerce. intelligence – both here in Australia
and overseas – are vital tools when
Online sales of consumer products building your brand and expanding
in China represent an exciting your business into Asia and beyond.
pathway to trade for Australian
exporters, who in the past, may
have found it difficult to break
into this market due to cost,
cultural or regulatory barriers.
1
Ministry of Commerce, China
4 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS
FOREWORD BY MINISTER
FOR SMALL BUSINESS
THE HON offers these businesses access
to over 300 million customers.
BRUCE BILLSON MP
The market is growing rapidly.
MINISTER FOR
China’s National Bureau of Statistics
SMALL BUSINESS estimates it expanded by 50 per
cent in 2014 to be worth around
half a trillion Australian dollars.
The hard working women and men
of Australian small business are This guide is free and is published
the engine room of our economy. in conjunction with a series of
Small businesses and family roadshow seminars the government
enterprises employ over four is conducting across our country.
and a half million Australians and
produce over $330 billion of our We are committed to ensuring
nation’s economic output each Australia is the very best place
year. Small business drives growth to start and grow a small
and creates jobs for our country. business. To do this we know it
is important to provide practical
Small businesses are often among information and support to help
the first to adapt to changes in small and medium enterprises
technology and resulting effects be export ready, establish a
on consumer demand – at the presence and build their sales.
coal face they are identifying
new trends and opportunities This guide provides a clear
in Australia and offshore. explanation of the key concepts and
regulations businesses will need to
This publication, E-commerce understand. It also includes case
in China: A Guide for Australian studies and a list of useful contacts.
Business, is designed to help
harness the historic opportunities I would urge all Australian business,
available through our Free no matter how small, to consider
Trade Agreement with China. the huge potential e-commerce
in China presents. This guide
For small business and family is a great starting point.
enterprise there is no substitute
for customers. The development
of a sophisticated online market
for consumer products, to such a
big export destination as China,
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 5
EXECUTIVE SUMMARY
Despite a macroeconomic slowdown in China, online costs, minimal risks and easier market access
consumer spending is growing at close to 50 per compared to traditional exporting.
cent a year, particularly in fast-growing second and
third-tier cities like Kunming, Wuhan and Shenyang. While buying quality overseas-made goods is an
These cities – often overlooked by the physical outlets unrealised aspiration of many of these consumers,
of foreign brands – are where online hypermarkets at least 18 million are already paying premium prices
such as JD.com and Yihaodian (YHD) dispatch for foreign products like food, cosmetics and luxury
hourly deliveries on fully laden electric bikes from items. These are directly imported through ‘cross-
thousands of distribution centres across China. border’ e-commerce trading platforms in seven cities.
The reduced import taxes and simpler quarantine
E-commerce brings China’s 332 million and inspection procedures within these pilot
online consumers within the reach of even business-to-consumer (B2C) gateways are stirring
the smallest Australian producers, with lower up much excitement among buyers and sellers.
6 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 7
DIVERSE ONLINE SELLER AUSTRADE:
MARKETPLACES BEWARE HERE TO HELP
For the Australian exporter, However, any form of international Austrade has identified a suite
selling online in China can be as marketing is not without its of useful reference materials,
straightforward as shipping your challenges, and selling online in including this guide, to help
goods through Australia Post, China is no exception. Information you learn more about key areas
or to the procurement centre of on e-commerce in China is affecting China’s changing business
an affiliated e-commerce market dense, complex and prone to environment. More information
place in Sydney or Melbourne. contradictions and frequent change. is available from our website2.
Professional third-party service
providers, online merchants and With more technology comes more For some producers, selling to
e-commerce marketplaces have buyer discretion. Simply being China’s online consumers will
quickly moved in to offer Chinese- ‘Australian’ or having a reputation for bring welcome but modest gains.
language storefront design, ‘safety’ will not guarantee success For others, China’s e-commerce
customer service, importation, in the long term. To stand above the market may be revolutionary.
warehousing and last mile delivery. noise, products need a persuasive
story and attractive and culturally This guide has been prepared
Established brands may choose to relevant design and packaging. with the advice of e-commerce
follow in the path of companies like and marketing professionals to
Blackmores and Bellamy’s Organic Doing business in China – like all provide essential information to
by establishing ‘flagship’ shopfronts international commercial activities – assist Australian companies make
on popular online malls. Such an carries certain risks that Australian informed decisions on commencing
approach brings added costs, but companies might not be aware of. on the path to their first online sale
also adds credibility in a market Australian companies should spend in China. Austrade wishes you
where barriers to entry are low and time investigating the market, obtain every success on the journey.
concerns about product authenticity professional advice and conduct
are paramount. Alternatively, online thorough due diligence before
hypermarkets offer upfront terms for establishing business relationships.
the most popular branded goods.
For emerging brands looking
to win market share, media-rich
online storefronts – complete
with product reviews – are an
unrivalled way to receive consumer
feedback and tell a brand story
at lower costs compared to paid
advertising or in-store displays.
2
http://www.austrade.gov.au/export/export-markets/countries/china/doing-business/Doing-business
8 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS
Credit: Alibaba E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 9
INTRODUCTION
THE E-COMMERCE MARKET IN CHINA
The online retail sector in China and social fabric. By June 2014, the to China’s National Bureau of
continues to attract the world’s China Internet Network Information Statistics4, it is a sector with sales
attention for its headline growth Center (CNNIC) estimated that of more than half a trillion Australian
and transformative effects on the more than 300 million Chinese dollars in 2014, a 50 per cent
country’s business environment were shopping online3. According increase on the previous year.
Figure 1: China e-commerce total sales value
3000.00
2500.00
100 million Yuan
2000.00
1500.00
1000.00
500.00
0
2009 2010 2011 2012 2013 2014
Source: National Bureau of Statistics Annual Online Retail Sales, January 2015
Exemplifying this growth, China’s evolution in other markets. In China due to its low costs and accessibility
biggest business-to-consumer it is driven not by PC shoppers of information. In 2013, sales in
(B2C) platform, Tmall, created but by consumers using mobile China’s online B2B market reached
the popular Singles’ Day on 11 devices. More than 40 per cent of RMB 7 trillion (US$1.2 trillion) with
November 2009 (written out with Tmall’s transactions are made by a year-on-year growth rate of 19.7
the lonely call sign of ‘11/11’). With mobile consumers. According to per cent8. Alibaba’s 1688.com
much anticipated discounts on the CNNIC, 520 million Chinese remains the prevailing platform
offer, subsequent Singles’ Days access the internet via a smart for such transactions, spanning
have broken consecutive world phone, from a total population of 16 industries including food, raw
sales records for a single day. 632 million internet users6. The materials, clothing and accessories,
On 11 November 2014, sales on Chinese Government’s target is and furniture. The site controls over
Tmall reached RMB 116 million in to connect 1.2 billion people – 85 40 per cent of the B2B market,
the first minute of the day and by per cent of the population – to 3G followed by Global Sources (a Hong
midnight exceeded RMB 57 billion5. or 4G mobile internet by 20207. Kong-based B2B media company)
and HC360 (a comprehensive
The uptake of e-commerce in Business-to-business (B2B) B2B platform covering more
China is significantly different to its e-commerce is also growing rapidly than 70 industrial clusters).
3
China Internet Network Information Centre, Statistical Report on Internet Development in China, July 2014
4
National Bureau of Statistics, Total Retail Sales of Consumer Goods in December 2014, January 2015
5
Xinhua News Agency, Singles’ Day sales boom breaks records, November 2014
6
Ibid CNNIC
7
Dezan Shira and Associates, Trends in China’s E-Commerce Market, June 2014
8
China Internet Watch, China Online B2B Market Update in 2013, May 2014
10 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSDRIVERS OF GROWTH
The pervasiveness of technology Uber delivered a lion dance troupe Another key factor underpinning
across China’s cities is having to perform in a subscriber’s office the growth of e-commerce is rising
profound effects on the market for for less than RMB 200. This is a incomes. McKinsey estimates that
goods and services. A 2014 survey reason why more than 200 million 14 per cent of China’s households
conducted by product research consumers used their mobile can be defined as mainstream,
company Psyma showed 75 per phones to make purchases in with annual incomes of between
cent of phone users have made 2014. According to Dezan Shira US$16,000 and US$34,0009. These
online food or beverage purchases. and Associates, approximately families display more willingness to
Daily necessities such as rice and 70 per cent of all e-commerce pay for quality imported products,
drinking water, as well as taxis, related payments in China are often as a result of first-hand
movie tickets, haircuts, holidays now electronic, a reversal from experience during overseas work
and meals can be purchased via a five years ago when around 70 and travel. By 2022, the upper
mobile phone. During Chinese New per cent were cash-on-delivery. middle class will account for 54
Year in 2015, transport company per cent of all households.
Figure 2: Penetration of chained convenience stores – Number of outlets/million people
140
National Average: 22
16
Non-Tier 1 Tier 1
Cities Cities
Source: Euromonitor International, Cites in China: Economic and consumer dynamics for successful business, 2015, p.8
The shortcomings of traditional shipment of goods to China’s rice. For time-conscious consumers,
retail are another factor. Despite inland provinces is often the only online shopping is a necessity.
having more wealthy households means of purchasing certain
than Australia, China’s consumers goods at affordable prices. Furthermore, well-publicised concerns
are comparatively underserved over unsafe and counterfeit products
by local retail channels Meanwhile, in China’s first tier cities have undermined trust in many
of Beijing, Shanghai, Guangzhou locally produced products, pushing
As shown in Figure 2, the availability and Shenzhen, congested traffic consumers towards goods with a
of branded products has not means it is often more convenient to strong reputation in overseas markets
kept pace with the demand from purchase online, especially for heavy and to reputable sales channels.
second and third tier cities. Online bulk goods like water, cooking oil and
9
McKinsey and Company, Meet the 2020 Chinese Consumer, March 2012
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 11UNDERSTAND CHINA’S
ONLINE CONSUMERS
SHOPPER PROFILE WHO IS BUYING GOODS ONLINE AND WHY?
CHRISTY According to Nielsen research, the more than RMB 11,000 per month
typical online buyer of imported (A$2,150 a month or A$25,800 a
PUBLIC SERVANT products in China is female, younger year)10. Frequently cited reasons
than 30 and with an income of for shopping online include:
Christy is a 29-year-old public
servant and mother of an
18-month-old boy. She spends
two to three hours every day
looking for food, household Accessibility: online shopping is available anywhere, any time.
items and baby or toddler
products on Taobao, JD.com,
Yihaodian and WeChat. She Convenience: most major sites offer free delivery, which
estimates that she has spent helps to avoid crowded traffic and public transport.
over RMB 15,000 on infant
formula, baby food and toys
in the past 12 months. Low prices: online prices are typically 10-20 per
cent lower than in-store, with sales events like
‘I don’t fully trust domestic Singles’ Day offering even bigger savings.
brands. When available, I
always choose imported
products for my child. I usually Greater choice: a typical Chinese supermarket carries upwards
buy from trusted e-commerce of 15,000 stock keeping units (SKUs), whereas online supermarket
sites because I know that I Yihaodian stocked up to eight million SKUs by the end of 2014.
can trust the importer. I take
product safety issues seriously.’
Detailed product information: online stores are rich in
the type of details sought by consumers, such as country
of origin, production method and customer reviews.
Confidence: consumers place higher levels of trust
in the authenticity of purchases made on major B2C
platforms such as Tmall, JD.com and Yihaodian.
Given these factors, it is of little by PwC shows that the number of
surprise that Chinese users are Chinese consumers who report
some of the most regular online making daily or weekly online
shoppers in the world. A global purchases is double and triple the
online commerce survey conducted global average, respectively. 11
10
Nielsen, China sees more sophisticated online shoppers, September 2014
11
PwC, Total retail 2015: Retailers and the age of disruption, February 2015
12 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSCredit: Amazon China E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 13
WHAT IMPORTED PRODUCTS ARE
ONLINE SHOPPERS LOOKING FOR?
Credit: JD.com
Nielsen research estimated Chinese In 2014, Austrade analysed the toys, beer and honey. The figures
online shoppers would spend average daily frequency of Taobao also revealed significant buyer
RMB 100 billion (approximately shopper keyword searches interest in furniture and home
US$16.3 billion) in 2014 on imported performed over three months for improvement products: categories
products.12 Apparel, accessories 25 types of product which could be where Australian products are
and handbags are the most supplied by Australian companies. under-represented in China.
popular imported items sold in The most sought-after categories
China, followed by cosmetics were packaged snacks, children’s
and personal care products, and
mother-and-baby products.
12
http://www.nielsen.com/us/en/insights/news/2014/consumers-without-borders--chinese-shoppers-present-a-key-growth.html
14 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSFigure 3: Frequency of Keyword searches on Taobao for a selection of 25 products
Cheese
Olive oil
Pet care
Pet food
Packaged snacks
Jewellery
Home improvement
Outdoor and sporting equipment
Beauty and personal care
Toys
Clothing and accessories
Furniture
Vitamins and supplements
Honey
Juice and other beverages
Beer
Spirits
Wine
Seafood
Fresh and frozen meat
Fruit and veg
Yoghurt
Infant formula
Fresh milk
UHT milk
0 10000 20000 30000 40000 50000 60000 70000
Source: Austrade/Taobao, November 2014
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 15In November 2014, Ben Sun of
ThinkChina, a Sydney-based
terms. The results in Figure 4
show that skincare, food and
SHOPPER PROFILE
e-commerce data analytics wine, and milk powder were the
company, studied the product Australian products most sought LUCY
categories of Tmall and Taobao after by China’s online shoppers.
searches where the keyword DESIGNER AND OWNER
‘Australia’ was part of the search
Lucy is a 59-year-old designer
and small business owner
from Guangzhou. She recently
renovated her office and bought
almost everything for the project
Figure 4: Search volume (%) of Australian products online, from hardware to furniture
on Taobao and Tmall, November 2014 and construction services.
‘Interior design and construction
Fur products services are all available online.
2.40% I renovated my office with just
Others a few clicks of a button and
Health supplements 2.8%
5.41% minimal leg work,’ she says.
Lucy spent around RMB 280,000
Food & wine on renovating her 500 square-metre
18.64% office through online purchases – a
huge saving over traditional methods.
Skincare
39.86%
‘I was able to get quality pieces
without having to bargain. A secure
escrow account allowed me to view
Shoes & clothing
15.14% the product first before confirming
the order, and returning it for a
refund was easy when the product
Milk powder didn’t meet my expectations.’
15.75%
Source: Think China, November 2014
‘To sell in China successfully,
you need to leave your Australia
hat at the door and understand
the Chinese consumer.’
Chris Morley, E-commerce Director,
Premium Australia Foods
16 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSCredit: VIP.com E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 17
18 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS
GET YOUR PRODUCT READY FOR THE CHINESE MARKET Successful exporting requires optimising brand messages and designing products to cater for subtle but important differences in consumer behaviour across international markets. Austrade has more than a dozen business development managers working in the food and beverage, consumer and agribusiness sectors in China. Their experience suggests Chinese buyers look for products that: • have strong brand heritage outside of China • replace local brands that are not trusted (particularly if the end user is an infant or is elderly) • are innovative and novel • are lifestyle products (e.g. healthcare, vitamins and education) • are ‘natural’ alternatives to artificial products. Andrew Kuiler, a Shanghai-based Australian branding and packaging expert and founder of the Silk Initiative, advises that for food exporters, just being ‘foreign owned’ is no longer good enough for Chinese consumers. ‘Success requires a strategy supported by a strong understanding of consumers and how they will use a product and respond to brand narratives,’ Kuiler advises. ‘Grounds on which Australian manufacturers can compete in China include innovation, natural and functional ingredients, safety and technology,’ he says. E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 19
PRICING
Exporters need to allow for Food Co., notes that ‘pricing is one A simple online search will show
sufficient margins to cover duties, of the biggest issues Australian prices for competing imported
tariffs, storage and delivery, brands face in China. Prices goods. Table 1 compares the
marketing and discounting. must be comparable with similar Australian and Chinese prices for a
imported products from Europe sample basket of goods sold online.
Margaret Harris, co-founder and and the US to be competitive.’
joint managing director of The Clean
Table 1: Prices of Australian-branded consumer goods sold online in China, December 2014
PRODUCT VOLUME PRICE IN A$ PRICE IN CHINA
(A$ equivalent)
SPF 30+ sunscreen 40ml 19.95 56.41
Face cream 125ml 32.95 52.48
Age-Defying Ultra Firm and Lift Cream 50ml 90.00 138.09
Cheese slices individually wrapped 12 pack 216g (AU) - 250g (CN) 3.30 5.83
Full cream Long Life milk 1 Litre x 10 15.80 30.00
Tasty cheese block 250g 5.70 8.77
Famous brand Shiraz 2013/14 vintage 750ml 8.99 28.79
Smooth peanut butter 500g 5.38 22.95
Australian squeezable honey 500g 7.30 19.06
Source: Austrade in-house research, 2015
Chinese consumers have shown a success over the past decade, driven buyer’s personality and travel
willingness to pay premium prices by China’s economic rise and a desire history. This is creating a good
for quality products. Australian for status-confirming products. market for well-crafted, Australian
manufacturers should prioritise their ‘affordable-luxury’ brands and
efforts to develop products that As the middle-income segment products, especially in the lifestyle
have high quality and brand appeal. and consumer tastes become and fashion segment, where well-
more nuanced, many shoppers designed and creative alternatives
Luxury brands from Europe and are looking to more modest, are increasingly popular.
the US have enjoyed tremendous unique brands that reflect a
20 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSPACKAGING
Because imported items packaging is consistent with this adopted by competing imported
are considered a luxury, perception. Searching for your products. Consideration
manufacturers need to product on any major platform should also be given to:
ensure the standard of their will reveal the form of packaging
Purpose: many imported goods are gifts to friends and family. Specialised ‘gift packs’ are popular options
Unit volume: for some products, larger-sized products help absorb ‘last mile’ delivery costs and
make better gifts. Many consumers order large quantities of a single SKU when shopping online
Authenticity: use features that are hard to replicate, such as holograms and logos
Traceability: use features such as barcodes and QR codes to demonstrate product provenance
Labelling: all food and imported products sold in China are required to have
a Chinese-language label explaining product contents and origin.
Credit: YHD.com
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 21UNDERSTAND CHINA’S
ONLINE MARKETPLACES
Exporters are not required to build Figure 5: China’s top B2C websites, market
and operate a stand-alone website share by total transactions, Q2 2014
in order to sell online to Chinese
consumers. Approximately 90
Yixun.com
per cent of online transactions in 1.40%
China occur on open, third-party
Yhd.com
e-commerce marketplaces. Amazon 1.4%
1.50%
These sites can display products, Dangdang Others
receive orders and handle payments 1.50% 7.41%
on behalf of merchants located in
China and abroad. They operate Gome.com.cn
1.90%
under one or more of the following
five main types of e-commerce Tmall
VIP.com 57.36%
marketplace models in China: 2.80%
• online malls Suning.com
3.50%
• hypermarkets and specialty sites
• flash sale sites
• C2C ‘online bazaars’
and social selling
• Stand-alone websites.
JD.com
21.22%
Source: iResearch, China Internet Watch July 2014
22 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSONLINE MALLS
Online malls are a collection Shoppers can purchase items operated by brand owners or
of independently managed from multiple shopfronts in a their licensed agents, who are
shopfronts operating under the single convenient transaction. required to pay an anti-counterfeit
banner of a larger marketplace. security deposit of US$25,000.
Tmall Global allows foreign
In exchange for a shopfront set- merchants to establish an official Site design, inventory management,
up fee, yearly ‘rents’ (commonly shopfront without requiring a warehousing, order fulfilment,
known as technology fees) and a business licence in China. Sellers customer service and delivery
sales commission of two to five will need to open an account with remain the responsibility of the
per cent, merchants benefit from Alipay – China’s equivalent of shopfront owner, assisted by the
the reputation and visitor traffic PayPal – to receive RMB payments marketplace’s proprietary back-
associated with the marketplace. from Chinese customers. To end platform. The marketplace
For example, Tmall has more ensure consumer confidence in does not purchase, store or
than 255 million registered the authenticity of merchandise, deliver merchandise.
users and 70,000 shopfronts. shopfronts on Tmall can only be
HYPERMARKETS AND SPECIALTY MARKETPLACES
Hypermarkets, such as JD.com, within their marketplaces to sell onto the vertically integrated
Yihaodian and Amazon, also allow speciality or low-turnover items. hypermarket model (see page 25).
independent merchants to list High-performing brands have
products or operate shopfronts the opportunity to be ‘graduated’
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 23Amazon China (Z.cn) is Amazon’s online shopping platform in China, which
provides over 25 million products spanning 32 categories. Amazon China
has 13 fulfilment centres across the country offering premium delivery service
including same day delivery and next day delivery in more than 1400 cities/
counties and more than 5000 pick-up points, and provides a convenient
and swift online shopping experience to Chinese customers. With the
unique advantage of rich global vendor resources and logistic network,
Amazon China today already hosts the largest international brands and high-
quality authentic international products among online retailers in China.
JD.com is China’s largest online direct sales company. JD.com owns and
operates seven fulfilment centres and 143 warehouses in 39 cities, with
a further 3,539 delivery stations in 1,961 counties and districts across
China, 134 of which offer same-day delivery. JD.com allows merchants to
open individual shopfronts and is also licensed to import food, beverage
products, apparel and shoes directly from Australia. A cross-border
service, JD Worldwide, was also recently launched, enabling merchants
who don’t have a China presence to sell direct to Chinese consumers.
SFHT.com is part of SF Holdings (Group) and is a cross-border marketplace
for sought-after foreign goods using the international logistics network for SF
Express to provide customers with a fast end-to-end import and online retail
service. For brands, distributors and foreign retail partners entering China,
SFHT offers a complete solution including international logistics, customs entry,
domestic delivery and omni-channel promotion plans, both offline and online.
SFHT has marketing partnerships with third-party sales channels and offers
Online-to-Offline (O2O) integration with retail chain stores in Taiwan and Japan.
Tmall.com is China’s largest online marketplace dedicated to domestic and
international branded merchandise. Owned by Alibaba Group and launched in
April 2008, Tmall provides a marketplace for foreign brands or their approved
partners to open exclusive shopfronts. Tmall Global, launched in 2014, only sells
imported goods, and allows international brands without physical operations in
China to sell directly to consumers. More than 600 foreign merchants benefit
from exposure to the hundreds of millions of Chinese consumers who frequent
Alibaba’s marketplaces daily. Tmall Global has English-speaking support staff.
VIP.com was founded in August 2008 as an online special offers retailer
offering authentic, competitively priced and popular branded products to
consumers in China. VIP was listed on the New York Stock Exchange in
2012 and has more than 100 million registered members. Merchant support
provided by VIP’s end-to-end online cross-border solution includes receiving
merchandise in Australia, customs clearance, translation, design, segment
analysis and delivery in China. Sales commissions start from 20 per cent.
Womai.com is a Beijing-based specialty B2C e-commerce website
created in 2009 by state-owned food giant COFCO. It is focused on
staple foods, snacks, beverages and wine, which it purchases directly
from suppliers and can deliver nationwide from three distribution hubs
to its 15 million registered users, including refrigerated goods.
Yihaodian (translation: Number One Store) is China’s largest online retailer
of food and beverages, selling around 250 million imported items in 2013,
including one-third of all imported UHT milk sold online in China. Co-
founded by Chairman Yu Gang and Flinders University alumnus Junling
Liu, Yihaodian operates 17 warehouses and has 10,000 employees across
China. Yihaodian is 51 per cent owned by US retail giant Walmart and is
licensed to import food and beverage products directly from overseas.
24 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSOnline hypermarkets are vertically delivery stations in 1,961 counties required to manage distribution
integrated, multi-category and districts across China. or a shopfront, but are typically
marketplaces that purchase directly • Yihaodian stocks up to eight asked to provide official marketing
from suppliers for sale through million SKUs, with a focus on collateral to promote their goods.
their own network, much akin to a fresh food and beverages.
traditional ‘bricks-and-mortar’ retail • Amazon China offers same-
Smaller specialty marketplaces, in
store. Core to this model is the day shipping in major cities and most cases, also purchase directly
operation of a proprietary online access to popular imported items from suppliers, but focus on a
e-commerce platform and self- listed on its US parent site. particular product line, region (e.g.
owned distribution network offering Shanghai), need (e.g. food safety)
Selling to a hypermarket is
same-day delivery. For example: or community (e.g. paid-members,
done through negotiation with
expatriates). The following tables
• JD.com processes tens of a procurement manager. Both
outline some of the many specialty
thousands of orders per day through JD.com and Yihaodian are licensed
marketplaces that sell imported food
seven logistics hubs and 143 to import directly from Australia.
and beverages, fashion, accessories
warehouses, with a total of 3,539 Exporters or their agents are not
and general merchandise.
Table 2: Specialty marketplaces selling imported food and beverages
Shanghai-based seller of fresh food and beverages run by Shanghai
www.962360.com Bright Food, targeting everyday Chinese consumers.
Beijing-based online fresh food supermarket with national reach through its
www.benlai.com own online portal and shopfronts on Tmall, YHD and JD.com.
Online supermarket focused on offering same-day delivery to
www.epermarket.com Shanghai’s expatriate community. Own cold-chain delivery.
Online supermarket established in Shanghai in 2009 focused
www.fieldschina.com on quality and safety. Own cold-chain delivery.
New member-based online supermarket offering Shanghai residents a select
www.freshfresh.com range of imported staples ‘at cost prices’. Own cold-chain delivery.
www.fruitday.com Highly popular membership-based store selling premium boxed fruit. Established in 2009.
www.kateandkimi.com Shanghai-based seller of gourmet food and wine, operated by two expatriates. Own cold-chain delivery.
Beijing-based ‘fruit fan’ established in 2014, with own online portal
www.okshuiguo.com and shopfronts on Tmall, JD.com and WeChat.
www.pinstore.cn Japanese-operated seller of food and general merchandise.
www.sfbest.com Food and consumer product retail marketplace owed by SF Holdings (Group).
www.yiguo.com National seller of imported and domestic food and wine with one million users. Established in 2005.
www.youanxianpin.com National B2B-focused platform selling premium domestic and imported food.
www.yummy77.com Amazon-invested seller of imported and domestic foods with 500,000 registered users in Shanghai.
www.yesmywine.com One of China’s largest online wine stores with 6.6 million registered users.
Source: Austrade in-house research, 2015
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 25Table 3: Specialty and wholesale marketplaces selling fashion, accessories and general merchandise.
www.amazon.cn Official Chinese site of US e-commerce giant, also known as z.cn
www.dangdang.com China’s largest online retailer of books.
www.gome.com.cn National home electronics and appliances store that has expanded into fashion and lifestyle products.
Online seller of imported luxury fashion, homewares, accessories and
www.iluxday.com packaged foods. Handles importing, warehousing and logistics.
www.lamall.com Mother-and-baby speciality site.
Shanghai-based Glamour Sales is a membership-based website that offers daily flash
www.mei.com sales of more than 1,500 luxury international fashion brands to loyal fashionistas.
www.shangpin.com National flash sales e-retailer of fashion, jewellery and accessories with five million users.
www.suning.com One of China’s largest brick-and-mortar home electronics stores and a leading e-retailer.
An online channel for merchants doing business on Alibaba Group’s retail
www.1688.com marketplaces to source products from domestic wholesalers.
CONSUMER-TO-CONSUMER:
ONLINE BAZAARS AND SOCIAL SELLING
Consumer-to-consumer (C2C) Because establishing a store on Merchandise listed on JD.com
marketplaces operate under Taobao is effectively free, this can also be accessed through
a business model similar to marketplace is dominated by small Tencent’s popular social media
eBay. Alibaba’s Taobao C2C sole traders who compete fiercely platform WeChat (otherwise
marketplace was the pioneer of on price, leading to concerns known as Weixin). Merchants
China’s e-commerce sector, and among discerning shoppers on JD.com can set up their own
remains the most popular with a about product authenticity 13. ‘micro-stores’ to sell socially to
90 per cent market share in the Delivery times vary according to friends and contacts on WeChat,
C2C segment. Today, Taobao has the seller’s location and preferred with the option to use JD.com’s
eight million sellers and over 200 courier, and payment options vary nationwide fulfilment infrastructure
million active users. It is estimated from store to store. Establishing and Tencent’s finance tools.
that 50 per cent of China’s total a shopfront on Taobao requires
online sales occur on Taobao. registration with a Chinese ID card.
FLASH SALES
Flash sale sites specialise in selling appeal for consumers familiar means for exporters to ‘test’ the
new-to-market, discontinued or with overseas brands. Because market for new products before
surplus branded stock at discounted flash sale sites deal with discrete establishing a more substantial
prices. They hold particular quantities, they can be an effective online or offline sales presence.
13
Xinhua News Agency, Watchdog finds fake goods in online malls, January 2015
26 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSSTAND-ALONE E-COMMERCE WEBSITES
Given the popularity and exporters. Any company seeking to receive payments in RMB.
convenience of third-party to sell products through its own Engaging in-house delivery requires
marketplaces, building a stand- site is required to register a establishing a separate wholly
alone transactional website for business and follow a lengthy foreign-owned enterprise and
China is typically considered too record-filing procedure. A third- acquiring a transportation licence.
difficult and costly for inexperienced party payment solution is required
Table 4: Select marketplaces compared
Alibaba Group
Marketplace name
Taobao
Business model Marketplace Tmall.com (B2C) Hypermarket Online mall Hypermarket Online mall Flash sales
(C2C)
Estimated number
350 million 105.2 million 90 million 100 million
of users
Products for
Focus General merchandise General merchandise Food and beverage
women
Number of
N/A 50,000+ 1 100,000 1 N/A 1
shopfronts
Estimated number More than 1 billion product
40.2 million 8 million Rotational
of products and service listings
A$3,000 –
$33,000 A$2,000 A$2,000
Shopfront deposit N/A
(depending on
Not required
- $19,500
Not required
- $20,000
Nil
store type)
A$6,000 –
Annual marketplace $12,000
N/A Not required A$1,300 Not required A$1,130 Nil
fee (approx.) (depending on
categories)
Commission N/A 2-5% 1-10% 1-10% 20-35%
Yes
China ID / business Yes (Tmall.com)
Yes No (JD worldwide No Yes No
registration required No (Tmall Global)
No)
In-house delivery
No No Yes Yes Yes No Yes
and logistics
Australian-based By individual By individual By individual By individual
No No Yes
procurement? shopfronts shopfronts shopfronts shopfronts
By individual By individual
Direct import No No Yes
shopfronts
Yes
shopfronts
Yes
Yes (by Yes (by
Cross-border Yes (Taobao Yes (Tmall Yes (JD
approved Yes approved Yes
capable International) Global) Worldwide)
shopfronts) shopfronts)
Ownership Alibaba Alibaba Publicly listed 51% share by Walmart Publicly listed
Payment methods Alipay Alipay Tenpay, JD pay Alipay Alipay, Tenpay
Source: Austrade in-house research, 2015
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 2728 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS
PROTECT AND MANAGE YOUR
INTELLECTUAL PROPERTY
The first step for any company considering selling Australian merchandise
in China is to register their trade mark immediately
IDENTIFYING IP VIOLATIONS
Common types of intellectual Whether outsourced or conducted Companies can also pay RMB
property (IP) violations in China in-house, most companies adopt 800 to Chinese Customs
include infringement of copyrights, measures to proactively search to have them monitor their
trademarks, patents and design. the internet for all known kinds trademarks and contact them if
Specifically, similar domain names of violations, including domain any violation is discovered. It is
and website styles are among name squatting, unauthorised increasingly common to send
the most frequent complaints sales, look-alikes, free-riding or staff to corporate functions and
made by foreign companies trying actual sales of counterfeits. trade fairs, where infringements
to enter the Chinese market. are commonly spotted.
REGISTERING A TRADEMARK
In China, a trademark (except adequate protection under relevant of the application within nine
for very well-known ones) offers Chinese trademark classes. months from the date of receipt of
little protection without pre- the required documents. Further,
registration. It is therefore essential Registering a trademark costs RMB companies should ensure that
to register any key trademarks 800. However, foreign companies they have documentation (such
and logos with the trademark are required to entrust a trademark as an international trademark
bureau of the State Administration agency to handle the registration, filing certificate, in both English
for Industry and Commerce which means there is an additional and Chinese) showing that they
(SAIC) as soon as possible and agency charge ranging from RMB own their registered IP in China.
seek the advice of a lawyer or 500 to RMB 1,000. The trademark
trademark agent to guarantee bureau will complete examination
REMEDYING IP VIOLATIONS
In response to a violation, will be applied to vendors of
businesses within China can call the counterfeit merchandise.
National Copyright Administration
at 12390 or the Intellectual Property Prior to taking any formal legal
Office at +8610 6235 6655. At action, a company must first contact
present, these hotlines do not offer SAIC, then hire a specialised
an English-language service. lawyer who can analyse the case ‘Never go into battle
to determine whether the defence before casting weapons’
Brands and merchants who find is sufficiently justified. Litigation Chinese Proverb
offending products or content costs can run up quickly, depending
on any of Alibaba’s platforms on the type of infringement,
may submit their findings via its and employing an international
IP infringement complaint and IP firm tends to be costly.
take-down system. Penalties
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 29GET YOUR GOODS TO CHINA
The four main pathways to export merchandise to China for sale on e-commerce marketplaces are summarised
in Table 5. The optimal pathway is influenced by the regulatory procedures that apply to a product, nature of
the product (e.g. size, value and freshness) and business model of the selected e-commerce marketplace.
Table 5: Export pathways
Customs
Pathway to Shipping Consignment
Consignee Marketplace and product Suitable for
market method size
clearance
• New to market products
International Approved
Direct to • Small items
postal and Individual End user cross-border Cross-border
consumer • Low turnover, high
courier marketplace
value items
Consolidator
managed
• New to market products
Bonded shopfront
Consolidated Local agent • Large items
warehouse + Sea or air freight Cross-border
or small or partner • Medium turnover,
drip-shipping Approved
medium value items
cross-border
marketplace
Online
• Established brands
Distributors hypermarkets
Conventional All duties, VAT • High turnover, low to
Sea or air freight Bulk Online Cold-chain
distribution and quarantine high value items
hypermarkets equipped
• Fresh and frozen food
specialty sites
Australia-
Sales via third Consolidated based agents All duties, VAT
Domestic Any Any
parties or bulk of marketplace and quarantine
or distributor
Source: Austrade in-house research, 2015
30 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSCROSS-BORDER SALES:
DIRECT-TO-CONSUMER AND BONDED WAREHOUSE DRIP-SHIPPING
Cross-border sales are defined Shanghai, Hangzhou, Ningbo, certain products under China’s
as the direct import of goods Zhengzhou, Chongqing, Guangzhou Luggage and Postal Tax Policy.
from outside the customs territory and Shenzhen Qianhai.14
of China, utilising special pilot Under this policy, combined total
channels, known as cross-border The primary advantages of cross- import taxes (import duties, value-
e-commerce platforms, and border sales are the reduced added tax and consumption tax)
based on the preferential policies import taxes and product apply to personal purchases15
of bonded zones in seven cities: compliance checks applied to of the following products:
Table 6: Import taxes on cross-border sales (personal purchases)
10% Food (including healthcare products), underwear, shoes
20% Suitcases, leather products, electrical appliances
30% Watches, golf-related products
50% Cosmetics, skincare products
Source: General Administration of Customs, 2015
The calculable luggage and (see pages 40-41) are exempted directly to Chinese consumers. (A
postal duty is not charged if under the following conditions: range of third-party service providers
the cost of goods is less than are listed on pages (58-61).
RMB 50. By comparison, regular • The exported product conforms
with domestic product
For example:
import duties, value-added tax
and consumption tax applied to standards applicable in the
exporter’s home market. • healthcare products are not
merchandise imported through required to carry China’s mandatory
traditional means can add up to • The exporter possesses a retail ’Blue Hat’ certification.
150 per cent, especially for luxury or trading licence in its country of
origin, and either owns the brand • infant formula does not need to be
items. (Information on the taxes manufactured by a Certification
and other regulatory procedures or is an authorised distributor
of the products in question. and Accreditation Administration
applied to regular exports of a (CNCA) accredited factory.
range of popular Australian items • The exporter complies with Chinese
can be found on page 42). consumer laws, offers Chinese-
language customer support, provides
Furthermore, normal quarantine a way to handle customer returns in
and other compliance testing China and arranges overseas shipping
14. Shenzhen Qianhai is yet to determine the eligible e-commerce platforms for its pilot cross-border trade. Authorities are looking to expand the pilot scheme nationwide in the near future.
15. Defined as orders of two or more products with a total value under RMB 1,000 (RMB 800 for goods from Hong Kong, Macao and Taiwan); or an order of one product of any value
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 31CROSS-BORDER SALES
BY THE NUMBERS
number of
18 number of cross-
2,000
ENTERPRISES border SHOPPERS
in China
ENGAGED in
cross-border sales million
percentage of CHINESE
39% SHOPPERS who have
purchased from Australia
US$118.8 million
number of survey value of cross-border goods
43% respondents who cited
long delivery times as a
imported between July
2013 and November 2014
problem with CROSS-
BORDER SALES
//////////////////////////////////////
RMB 1 trillion
78%
share of cross-border estimated size of the
transactions made via cross-border market
MOBILE PHONES in China by 2018
Source: China Internet Watch, General Administration of Customs, Tmall Global 2014
32 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSThese preferential policies result bonded warehouse in China (via QR sticker) and dispatch the
in lower costs (estimated to be (available through the Victorian goods to a domestic courier.
20 to 30 per cent cheaper than Employers’ Chamber of Commerce
physical stores) and faster product and Industry (VECCI) and Premium These services are delivered
clearance and dispatch times (one Australia Foods), or via express through their own e-commerce
to two days, versus up to 30 days mail delivery (available through stores (such as kuajingtong.
for bulk commercial shipments). Australia Post’s service with Tmall). com), or through a government-
For these reasons, cross- approved arrangement, with around
border sales are conservatively Orders are processed by designated 2,000 third-party e-commerce
estimated to double in 2015. e-commerce trading platforms. marketplaces licensed to handle
These platforms, usually set up cross-border transactions, such
Cross-border merchandise can be and maintained by a state-backed as Tmall Global or JD Worldwide.
sent to China as a consolidated or licensed company, handle
shipment for dispatch from a customs clearance, track-and-trace
Table 7: Examples of approved platforms and e-commerce marketplaces
Location Licensed cross-border trading platform Approved partner e-commerce marketplace
Shanghai Free Trade Zone kuajingtong (跨境通) amazon.cn, yhd.com
Ningbo kuajinggou (跨境购) alldaycn.com, ikjtao.com
Hangzhou kjeport (跨境一步达) Tmall Global, yintai.com
Zhengzhou National Economic and
Technological Development Zone e-maoyi (e贸易) wgyp.com
(Henan-bonded logistics centre)
Chongqing bonded zone cqkjs (重庆跨境贸易电子商务服务网) igetmall.net, 365hele.com
Guangzhou Top Ideal SCM (卓志供应链) JD Worldwide
Source: Austrade in-house research. Information current at February 2015
Credit: Amazon China
E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESS 33CASE STUDY:
BELLAMY’S ORGANIC
Bellamy’s Organic flagship stores on Tmall (above) and Tmall Global (right)16
Bellamy’s Organic, a Tasmania-based organic infant food company, entered the Chinese market a decade ago and
is well established in both online and offline channels. Products that have been designed to comply with organic
and other certification requirements are sold through regular trading and sales channels. By establishing a flagship
store on Tmall Global and taking advantage of China’s cross-border e-commerce policies, Bellamy’s distributor is
able to directly sell to consumers infant nutrition products which meet Australia’s domestic requirements only.
CONVENTIONAL DISTRIBUTION
The majority of imported ship full container loads directly entry strategy that complements
products sold in online malls and to the warehouses of integrated and drives offline distribution.
hypermarkets in China are handled e-commerce marketplaces, For example, many consumers
by conventional distributors, who are such as online hypermarkets use smartphones to read online
experienced in managing customs and specialist websites. For product reviews and promotional
and quarantine procedures, storage this to occur, an e-commerce materials before finalising an in-
and distribution of merchandise to marketplace must have the store transaction. User-generated
both online and offline retailers, such necessary import licence (e.g. feedback from online channels
as department stores, supermarkets dairy import licence). All remaining can help popularise a product
and convenience stores where the distribution is managed through the in offline markets, or direct an
vast majority of retail sales occur. marketplace’s internal network. exporter to areas where product
refinements are needed.
For high turnover items, such An online sales channel should
as infant formula, exporters can form part of a wholistic market
16. http://bellamys.tmall.com/?spm=a1z10.3-b.1997427721.d4918089.p5cUGg and
http://bellamyshk.tmall.hk/shop/view_shop.htm?spm=a220m.1000858.0.0.eNEdDW&scm=1048.1.1.12&rn=b35f833f0398ac8231d008b7b85ca93e
both accessed 29 March 2015
34 E-COMMERCE IN CHINA: A GUIDE FOR AUSTRALIAN BUSINESSONLINE VERSUS OFFLINE:
MARKET ENTRY FOR AUSTRALIAN FOOD
Figure 6: Sales channels of packaged food and beverages in China
Health food shops/online shops/
Other food direct selling/ other
groceries 2.5%
16.3%
Hypermarket Supermarket
17.9% 40%
Convenience stores/
food groceries
23.3%
Source: Euromonitor, 2013
Online sales form only part of traditional means of distribution, associated with online shoppers,
a comprehensive market entry such as the food service sector. particularly for undifferentiated
strategy. According to Euromonitor, there are products. ‘Much of the recent
more than 24,000 fast-food chain turnover growth in online retail
As shown in Figure 6, online sales outlets and more than 30,000 chain has been from bargain hunters
of food and beverage account hotels in China. Such outlets have who easily switch brands once
for no more than 2.5 per cent of modern procurement practices promotions become less attractive,’
national food sales. Of this amount, and are attuned to the quality says Vision Management
heavy bulk products such as rice, demands of their customers. partner Frank Gibson. ‘It would
cooking oil and bottled beverages be dangerous to view an
represent a lion’s share, with a Xavier Naville, a partner at Vision online presence as a universal
sizeable amount of chocolate, Management Consultants, says solution for a China entry.’
fresh and dried fruit and other that China’s expansive third-
snack food also sold online. tier cities are often a mistakenly In China, as elsewhere in the world,
overlooked source of sales sustained profitability is built on
For smaller exporters, online sales opportunity for food exporters. communicating value and striking
can be a cost-effective means to ‘There are over 600 major cities the right balance of interests
establish a sales footprint in China, behind the main first-tier centres between exporter, distributor and
particularly for niche products in China. They’re the ones where retailer. ‘If you want to build a
not traditionally available in China consumers have fewer choices brand, and get any real volume, you
where educating consumers of brands. In the main cities, it’s a still need to be able to effectively
through mass-market advertising cage fight between all importers.’ build brand, communicate with
can be prohibitively expensive. consumers and defend pricing.
Working with offline distributors This requires investment and
Companies looking for high also helps to avoid the type of capability,’ says Gibson.
turnover need to look towards more price hypersensitivity that can be
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