May 23, 2013
Expanding your business to Asia-Pacific markets can be a bit more work, but it’s profitable! There’s high demand in China for foreign goods, yet obstacles faced while entering the market might cause some merchants to think twice — but no more.
Now is the perfect time to look at Hong Kong fulfillment to get your foot (and products) through the door to China. Here are 5 reasons why:
1. Chinese e‑commerce is exploding
China is quickly on its way to overtake the title of the world’s largest online shopping market. In Q3 2012, the total transactional value of all Chinese e‑commerce was USD 319 billion, averaging about $40,000 spent per second. Taobao, China’s largest C2C site (analogous to eBay) generates about 50,000 transactions per minute! It is predicted that China’s e‑commerce (including B2B transactions) will top 30 trillion yuan (USD 4.89 trillion) by 2020. And with the number of Internet users increasing exponentially each year, this means more and more customers will be going online to purchase their favorite products.
(source: We Are Social SG)
2. They have major buying power
While the majority of online shoppers are 25-35 years old, China is also home to around 5 million online shoppers over the age of 50. Online shopping is the fastest and most convenient way for Chinese netizens to get foreign products that aren’t readily available locally. A report from the CNNIC (Chinese Internet Network Information Center) shows that the top 5 categories of overseas purchases are: clothes, cosmetics, milk powder, electronics, and home furnishings.
3. They like to shop on mobile and online
Mobile shopping is also gaining ground in China. Some 388 million Chinese netizens access the Internet via their mobile phones while 380 million access the web via desktop computers. Just as the number of Chinese internet users are increasing, those online are also increasingly comfortable making purchases through the apps on their mobile devices: Just last year, 13.2% of online shoppers used their phones to buy things, compared to 12.1% the year before.
What does this all mean? E‑commerce in China is booming, making China a perfect target market for businesses looking to expand globally. The graph below shows that almost 58% bought foreign goods but through a Chinese website, as compared to 30% who purchased directly on a foreign website.
Why does this concern me? Merchants should consider making their goods available via Chinese marketplaces and using or selling through local e‑commerce storefronts. Shoppers often prefer to buy from these local websites because transactions are easier to make. Most shoppers use (and often only own) credit cards that are widely accepted within China and nowhere else. The most commonly accepted form of plastic in China is UnionPay, a Chinese credit card company. Even though Chinese shoppers are less inclined to buy directly off a foreign website (due to restricted payment options), that doesn’t stop their growing demand and love for foreign brands, which they perceive to be of higher quality. They want foreign goods that can be easily purchased locally.
4. How do I sell? Where do I sell?
Important things to consider when expanding your e‑commerce business to China are how and where to sell. Many of the Chinese e‑commerce giants offer options to sell on their platform through your own storefront or list your products in their existing online department stores. Larger businesses should consider Tmall.com (it has 39.9% market share in China), and smaller businesses may want to take a look at Taobao.com.
Expanding in China isn’t as simple as listing your products for sale and getting all the web copy localized. Check out this Asia shipping white paper that covers cultural nuances and lessons that retail giants like Coke and Best Buy picked up in their missions to expand into China, and how to overcome some of the challenges of expanding into Asia-Pacific.
5. How can I get there?
What better way to enter the market than by having your goods warehoused in Hong Kong, the preferred hub of international trade. The time and money you’ll save in terms of fulfillment (versus pricey courier fees and longer shipping times) can help reduce the costs of expanding globally. Having your products in Hong Kong generally means fast shipping to nearby locations like Singapore, Taiwan, Japan, and Korea. By making the move to expand in China via Hong Kong, you’re really making the move to expand to Asia-Pacific.