Creating your eCommerce model for China
In the highly competitive and fast-changing Chinese tech market,
innovation is king. In 2018, the Chinese ecommerce market exceeded
$1.3 billion in sales. And the appetite of Chinese consumers, especially
for luxury products, keeps growing. Creating a solid and effective
ecommerce strategy can help a company reach the more than 300
million people making online purchases in China.
A shifting regulatory and economic environment, in addition to intense competition, are forcing online companies in China to transform and adapt to changes faster than their Western counterparts. Chinese businesses are blending various forms of social media, entertainment, and commerce to reach even more consumers and grab a piece of the ecommerce market.
Newer platforms such as iQiyi, Pinduoduo, and Xiaohongshu, are competing to offer the online shopper a more personalized experience that combines different forms of social media and ecommerce. A user of the video-streaming iQiyi platform can access countless hours of videos and movies, similar to any Netflix or Youtube viewer. A significant difference is that iQiyi users, while watching their favorite show, can click on a link to purchase the costumes, products, and clothing being used on screen. This allows the app to reach consumers who watch over 600 million hours of content a month.
Another interesting example is Pinduoduo, which blends online shopping with elements of social media. Through a collaboration with social media networks such as WeChat and QQ, Pinduoduo facilitates consumers to band together to form a “shopping team” to buy discounted items and save a Chinese consumer up to 90% off the original price.
Similarly, Xiaohongshu, translated as “Little Red Book,” is an additional ecommerce platform unifying popular aspects of online shopping and social media. Xiaohongshu specializes in beauty and fashion and gives its consumers the opportunity to buy a product, and post images, videos, and commentary showing the product in action. While traditional sites such as Taobao may offer users a greater selection, Xiaohongshu’s personal touch and social aspect made the platform instantly popular with users.
Ecommerce giants such as Alibaba and JD.com are also constantly innovating and adapting to keep up with new consumer trends and to stay ahead of the rest. As well as Tmall, Alibaba Group owns platforms such as business-to-business site Alibaba.com, retail site AliExpress and Taobao, and online payment system Alipay – which controls around half of China’s online payment market.
Fortune Global 500 company Jingdong (JD.com) has continued to grow within China’s e-commerce market with its multiple retail acquisitions, and retail tech and supply chain innovations. And for 2019, it was responsible for 16.7% of China’s retail e-commerce sales.
Foreign companies can also profit from the enormous potential of the Chinese market. However, China has a unique set of technical considerations for operating online that can be difficult to navigate for companies unfamiliar with it.
In order to operate successfully, foreign companies need to keep web traffic local, and house as much content as possible within mainland China. Operating from outside the Great Firewall can be extremely difficult and reduce reliability. Many standard web applications, such as Google APIs and YouTube embedded videos, simply do not work.
Since January 1, 2019, China’s Ecommerce Law covers the registration and operation of ecommerce platforms by requiring that businesses obtain the proper licenses prior to selling online. In addition, the law places stricter oversight on ecommerce operators and seeks to cut down on false advertising and tax evasion, while simultaneously seeking greater consumer protection and data privacy standards.
There are a few options that foreign companies must consider when developing an effective ecommerce strategy in China and maintain an online presence in the market.
It is important to partner with companies based in China, to avoid being blocked by the system. The Chinese Firewall is extremely complex, and many DNS and IP addresses may be blocked. Once this happens, there is no public support address to direct your questions and solve the issue.
Local businesses often have a government affairs office or longstanding relationships they can leverage to help you discern your problems and get your site back up and running. Chinese partners can help you obtain an ICP License. Without this license your hosting provider and CDNs can’t deliver content to or in China.
Your DNS provider should have a presence in mainland China. Without one, DNS lookups fail, and people can’t access your website. By using a DNS service that's entirely within mainland China, DNS requests are routed within the country. Similar to hosting content within the country, it improves performance and the reliability of these requests.
A common mistake made by foreign companies is to believe that translating content is enough to make their website accessible to Chinese consumers. There are many cultural aspects that are extremely different than those in other countries.
Chinese consumers often use different payment methods and prefer long site pages. It is important to review your site and make sure it is compatible with the preferences, likes and dislikes of the local consumers. Consider featuring products specifically tailored to the Chinese market and meeting the standards of other sites successfully operating within the country.
Any site with user-generated content, such as customer’s comments or reviews, could be victim of local policies that ban certain keywords or URLs and render your entire site inaccessible. Your team must be extra careful with user-generated content which could include a sensitive word or URL. On the same note, watch out for embedded YouTube videos, which don’t work within the Firewall.
Anything ending in .com or .net could prevent your site from being accessed because tunnels to foreign origins are illegal within the Firewall. Using a dedicated China domain name ending in .cn for your China-facing site could help navigate these issues. This greatly improves performance and reliability for this site when accessed by visitors within mainland China. But, having a .cn name alone, won’t fully protect your site. You also must be mindful of the other local restrictions and regulations around third-party requests and suitable content.
Foreign companies should also take into consideration that in China, it may take longer for content to load, as sites must navigate the complexity of the Firewall. This problem is exacerbated when the content entering the country is coming from outside of China. To combat this issue and prevent servers from timing out before everything on your site loads, make sure to extend HTTP server keep-alive times by 10-15 seconds.
China is extremely large and using only one data center is not enough. Foreign companies shouldn’t underestimate the size of the country -almost as big as the continental United States- and the scale of the population. To serve the Chinese market it is necessary to use multiple data centers positioned throughout the territory.
China is home to 730 million Internet users, and its mobile payments market is over 11 times the size of the market in the United States. As e-commerce and digital transactions expand exponentially, data centers, the warehouses of the digital revolution, are being built at a breakneck pace in China.
Long delays are all but inevitable when the assets required to load a page (images, references to APIs, CSS and more) are coming from outside the country or coming from a site with banned content itself. This can be a potential problem because the third-party assets are not necessarily coming from within the Firewall. You can do everything right and have your content based within the country, but if you're pulling third-party assets for your site as well, it will slow things down.
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DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.