Electronic Retailer - April 2012 - 35

GUEST VIEWPOINT

BY KAREN JACKSON

4 Strategies for Chinese Commerce Success
With the Chinese commerce sector growing by leaps and bounds, many U.S. retailers are cashing in on this market opportunity. Despite the optimistic outlook for commerce in China, the same aspects that make the market so appealing also present challenges for retailers. To ensure a seamless and prosperous entry into the market, there are important factors to consider.

Appeal to the Masses
Although the country itself is slightly smaller than the U.S., China is home to the largest population in the world. However, in order to be successful, U.S. retailers must do more than just convince a small portion of the total 1.3 billion Chinese to buy their product. Due to their cultural upbringing, Chinese consumers tend to follow the mainstream trends and exhibit similar shopping behaviors. If a product does not appeal to at least 30 percent of a target demographic, retailers have little chance of cracking the Chinese market. A useful test for whether your product will succeed is to work out at least 10 reasons why a Chinese consumer in your target demographic would want to buy your product. If you can easily fill 10 slots, it’s time to expand to China. Fortunately, Chinese consumers actually prefer foreign products to domestically produced goods. The contemporary Chinese middle class, and a majority of those who aspire to become middle class, have an aversion to domestically made products and local brands. Many Chinese consumers believe foreign products are of premium quality and hold them in high esteem. Local brands are often viewed as less fashionable, reliable or technically advanced than foreign counterparts. As a result, branded products from the U.S. and Europe have become instant favorites. Luxury goods have also become best-sellers among Chinese consumers as society increasingly values designer brands and lifestyle fashion. The growth of the luxury market will be intrinsically linked to the rise of associated purchases including jewelry, perfumes, watches, accessories, and even sports equipment and recreational items. E-commerce has enabled mainland Chinese consumers to buy many foreign products that would not be available otherwise; in fact, B2C e-commerce sales in China, excluding travel, are expected to grow more than 3,140 percent by 2015 according to a report by eMarketer.

Understand the Marketplace
It is crucial for brands taking the plunge into the Chinese market to fully consider the habits, culture, history and political environment of the country. Having an understanding of the Chinese lifestyle is the fundamental key to success; however, it is also important for companies to uphold the integrity, personality and history of their brand and its origin. It is wise not to go too far down the road of localization. After all, the foreign allure is what makes it so valuable in the eyes of the Chinese consumer. Consider Groupon’s China strategy if you want to see an example of how business and marketing faux pas can put a damper on Chinese market success.

Understand the Payments System
Cash is still the predominant form of payment in China. The market is relatively underdeveloped when it comes to e-commerce transaction security and credit-card use, both of which are uncommon. Cash on Delivery remains one of the leading online payment types in China and is frequently the first option listed for leading online retailers. Some prominent e-retailers, including Taobao – a popular virtual shopping mall – use an online payment system that holds customer payments until the purchaser has received and is satisfied with the product. Retailers that do require credit cards typically charge fees between 5 percent and 10 percent, raising the cost of merchandise for consumers. According to Forrester research, a large percentage of online orders are delivered by courier in the larger 35

April 2012 | electronicRETAILER

Electronic Retailer - April 2012

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