Australian retailers see the Chinese market as a huge opportunity but aren’t satisfied with the strategies they have in place to reach Chinese consumers, according to new research.
87 per cent of Australian respondents see China as a lucrative market, but 56 per cent are not satisfied with their current online capabilities in reaching Chinese shoppers, according to research conducted by Frost and Sullivan and Azoya Consulting.
(Azoya offers consulting services and white label ecommerce infrastructure for retailers, like Amcal, to enter China, providing an alternative to the marketplace giants like Alibaba and JD.com.)
According to the report, The Cross Border Ecommerce Oppurtunity in China, cross-border online shopping spending in China has exceeded US$100 billion, representing an oppuruntiy almost eight times larger than Australia’s total online shopping market.
“With China now the world’s largest online shopping market, Australian retailers and brands need to consider the best approach to reach Chinese consumers if they want to take advantage of this booming opportunity,” said Mark Dougan, managing director, Australia and New Zealand of Frost & Sullivan.
“The complexities and challenges involved mean a one size fits all approach isn’t appropriate to meet market demands. They need to carefully determine which model will work best for them.”
Broadly, the challenges if selling into China include: confusing regulation, intense competition, high investment required to enter the market and sales not profitable.
The study is based on a survey of 1,000 cross border online shoppers in China, as well as 100 international brand owners and retailers in Australia, New Zealand, the US, Canada and the European Union, conducted in 2018 to understand the strategies, expectations and experiences of online sales in China.
32 per cent of the respondents leverage marketplaces like Alibaba’s Tmall Global or JD.com to sell online in China. Of those only one in five (21 per cent)are satisfied with their sales on these marketplaces.
Respondents cited challenges such as lack of direct customer access; high commissions eating into margins; upfront costs to establish marketplace stores; and high levels of competition particularly around price.
“While Chinese marketplaces may seem an easy way to set up an online channel into China, they often generate disappointing sales and marketing results, particularly the lack of ability to connect directly with Chinese customers and to control their business,” said Dougan.
“Marketplaces may not necessarily be the best approach for Australian retailers and brands in the long-term. Instead, they need to take a broader view to set up a smart channel strategy with multiple touchpoints to approach customers and command healthy growth for the business.”
According to the research, Australian retailers are investing in improving their own capabilities to conduct direct online sales into China. For example, 63 per cent of Australian respondents plan on establishing a warehouse or distribution centre in China to meet inventory demands from consumers.
The report identified that international retailers need to focus on ecommerce basics to succeed in China, including efficient digital marketing, local logistics networks, a range of payment options, Chinese language customer service and content. The other consideration, which falls under marketing, is a robust social media strategy, including partnerships with influencers or key opinion leaders (KOLs), and market trends to reach and engage Chinese consumers.
Chinese shopping habits
According to the study, a quarter of China’s 500 million online shoppers purchased through cross-border e-commerce in 2017, that is, they bought something online from a retailer outside China.
On average, these shoppers are spending nearly US$850 a year on cross-border purchases, with 60 per cent expecting to spend more over the next 12 months. Top categories include: fashion (22 per cent), beauty and cosmetics (20 per cent) and mum and baby (15 per cent).
The study indicates that 37 percent of Chinese online shoppers prefer to buy from Australia, behind Japan (72 percent), Korea (60 percent) and the US (55 percent). There are however, distinct gender differences, with females favouring Asian countries, particularly Japan and Korea, while men have a stronger preference for products from Australia, the US and Germany.