Succeeding on the Chinese market: understanding the specific features and advantages of e-commerce in China

Introduction

E-commerce in China is a dynamic and constantly evolving sector, accounting for a significant proportion of retail trade. Chloé Berndt, Associate Director of VVR International, a company with expertise in the Chinese market and a founding member of Globallians, highlights the importance of understanding how to take advantage of the opportunities offered by e-commerce to develop in China.

Key figures

China, with its 1.4 billion inhabitants, represents over 18% of the world’s population and is the second largest economy, with a growth rate of 5.2% in 2023. In the B2C sector, e-commerce accounts for an average of 38% of sales, compared with 62% for traditional retail, far outstripping the proportions seen in the United States (19%) and Europe (15%).

Breakdown by sector

In China, the sectoral breakdown of online sales reveals distinct consumer trends that are crucial for companies wishing to penetrate this market. This segmentation varies considerably between different product categories, reflecting the unique preferences and behaviours of Chinese consumers.

In the jewellery sector, only 10% of transactions take place online, illustrating a preference for in-store purchasing, where consumers can physically assess the quality and authenticity of high-value products. However, this figure contrasts sharply with that for cosmetics, where around 40% of sales will be made via e-commerce in 2023, rising to over 50% by 2024. This sector benefits from a strong digital presence and influential marketing through social networks, both commercial and non-commercial, which allow consumers to discover new products and beauty trends almost instantly.

Even more impressive is the small electrical appliances sector, where over 80% of sales are made online. This high proportion is explained by the convenience of shopping and the ease of product comparison offered by e-commerce platforms. Chinese consumers actively use online reviews and product comparisons to make informed purchasing decisions, favouring online sales for products where technical specifications and performance are easily comparable.

This sectoral breakdown not only indicates the areas where e-commerce is particularly powerful, but also highlights the opportunities for international brands. To succeed, companies need to understand these nuances and adapt their market strategy and online approach accordingly.

Domestic vs. cross-border e-commerce in China

The distinction between domestic and cross-border e-commerce is essential to understanding the nuances of the Chinese market. Each of these channels offers specific opportunities and challenges that companies need to master if they are to succeed.

E-commerce Domestic

The domestic e-commerce market in China is strictly regulated. Companies wishing to operate within this framework must comply with precise rules, particularly in sensitive sectors such as food and cosmetics. Regulations include rigorous testing, certification and labelling requirements, which can represent a significant obstacle for new foreign brands. In addition, competition in the domestic market is fierce, with a strong presence not only of major international brands but also of powerful local players.

Cross-Border E-commerce

The cross-border model, introduced in 2012, was designed to simplify the entry of foreign brands into the Chinese market. This system allows companies to sell their products in China without having to meet all the regulatory requirements applied to enter the local market. Platforms such as Tmall Global and JD Worldwide play a crucial role in this system, offering foreign brands direct access to Chinese consumers. This channel is particularly advantageous for testing products in the market without long-term commitment, as it allows products to be sold during specific periods or to test consumer receptivity to certain items before engaging in the complex and costly process of regulatory compliance required for domestic e-commerce and retail.

Differentiation and strategy

The cross-border approach is also an excellent way for brands to differentiate themselves. By offering unique products not available on the domestic market, brands can stand out from the crowd and attract consumers looking for novelty and exclusivity. However, brands need to be strategic in the selection of products offered via cross-border to ensure that they meet the preferences and expectations of Chinese consumers. Companies also need to understand and adapt to the cultural nuances that influence consumer behaviour. For example, promotional periods such as the 11.11 Shopping Festival (Single’s Day) require specific marketing strategies and promotional offers that may differ considerably from traditional Western approaches.^[1]


[1] https://www.vvrinternational.com/11-11-en-chine-retour-sur-la-mutation-dun-evenement/

Key platforms

In addition to Tmall and JD, platforms such as Pinduoduo have grown in importance, offering a wide range of products and becoming a major player, even surpassing Amazon in terms of sales.

Role of Social Media

Social media, such as Xiaohongshu (RED), play a crucial role in integrating social networking and purchasing, making digital communication essential to reach consumers who use several sources (up to 8) to compare prices and find out about products.

Conclusion

Tips for Success

To succeed in e-commerce in China, it is vital to maintain consistent digital communication and to be agile in the face of changing trends. Companies need to monitor new platforms and adapt their strategy accordingly.

E-commerce in China offers immense opportunities, but requires an in-depth understanding of the specific characteristics of the market, as well as an unprecedented level of responsiveness. To take advantage of this growing sector, constant monitoring and rapid adaptation are crucial.

Globallians, the leading network of international development experts: VVR International‘s China expertise

Globallians is the first network of international development experts specialised by country. One of our 14 country experts, VVR International, has been guiding foreign companies, particularly European and French, for over 25 years in their industrial and commercial development in China.

You can also find advice from Chloé Berndt, China expert at VVR International, on the Globallians YouTube channel: China: E-commerce – YouTube

^[1] https://www.vvrinternational.com/11-11-en-chine-retour-sur-la-mutation-dun-evenement/