12
Feb
Distribution – the key to unlocking success in China – Cross Border eCommerce
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If you can create demand for your product in China… then watch out.
You might be surprised at this advice. But when it comes to China, creating a demand means sales can come flooding in at break-neck speed.
And when that happens, it’s terrific – but you need to be absolutely sure you can deliver on your promise.
Creating a knock-out marketing campaign that gives your product exposure in China is an incredible feat. It can also be time-consuming, exhausting, mentally and physically draining.
The danger is, it’s easy to believe that your work is done. You have reached your goal. And why wouldn’t you? Australia’s export to China is worth around $USD103 billion.
But the problem is many businesses don’t put nearly as much energy and effort into what comes next – making sure they have fast, reliable, responsive distribution, to ensure their customers get what was promised.
Without five-star distribution your Chinese customers will disappear into thin air, your reputation will be destroyed and your China business will fail.
So this blog will outline some of the different ways you can establish a distribution model that will meet demand and not only keep your customers happy but ensure they come back for more.
Over the years we have seen developments in the way that we export to China because distribution channels have expanded and diversified.
A traditional trade route usually involves having a China-based agent who is responsible for processing your inbound customs clearance, paying tariffs and duties and then organising local distribution. This can be to a wholesaler or directly to the customer as a part of domestic trade.
In this situation, the agent or importer also usually assumes responsibility for the China-based distribution and marketing. What that means is that many exporters have little or no interaction with the end customer.
But thanks to the internet revolution, traditional trade routes are now just one option when it comes to distribution.
In China, the growing middle class and a huge number of internet and mobile users, has put Chinese consumers firmly in the sights of some of the world’s biggest brands.
In the past, these brands have looked at China’s huge population and buying power with envy. However, there was no effective way to transact with them.
The internet has changed all of this. Now, these companies have the ability to trade quickly and efficiently with Chinese consumers. The key to their success is they have bypassed traditional trade routes and connected directly with their customers.
With the world wide web and technological advances, Australian brands can now start selling and distributing to China, far quicker than ever before.
Thanks to the help of social media apps, faster & cheaper logistics, eCommerce and live-streaming, we can literally be in the loungerooms and on the mobile phones of millions of Chinese customers – with the tap of a screen.
Favourable cross border policies in China, have also made it more enticing and cost-effective to do so.
According to research, Chinese shoppers have a healthy appetite for Cross Border eCommerce. This is essentially the process of giving your customers in China the power to buy directly from you in Australia.
Here you can see China’s Cross Border eCommerce performance in comparison to other countries. Dark blue is domestic, versus light blue, which is a combination of domestic and cross border and then pink which is purely cross border.
Over a short period of time, consumer confidence has grown significantly, and you can get a taste for this on the following chart, which shows growth in 2018 for various product categories.
In 2018, goods imported into China via cross border eCommerce, reached RMB 78.58billion, and further significant growth rates are projected. (Deloitte)
For customers in China, the benefits are: the opportunity to buy goods not already available there, cheaper products and access to the latest trends.
Preferences were also linked to safety and quality. Baby formula, for example, is popular from countries such as Australia and New Zealand, because it’s seen as better quality and more trustworthy.
But Cross Border eCommerce is not without its challenges because the eCommerce space is already very busy and competitive. And you will still need to navigate the regulatory environment which has its own set of rules and regulations.
So where do you start? What are the distribution channels and how do you get your products from here to China?
When it comes to cross border eCommerce, there are a number of ways you can cash in on it. Two popular ways include through eCommerce platforms or by utilising a third party who will represent you on one of these platforms.
There is also the option of using your own eCommerce website
You will see below the various online options for Cross Border eCommerce, each is different in terms of the way they operate.
- Online market – An example is Tmall Global, where you set up or participate in a flagship store. They generally handle the transaction and payment and depending on which platform you choose, each has different logistics options for the seller. Most have hefty setup fees, commission on sales and also marketing costs.
- Hypermarkets – Are platforms that generally buy directly from the seller and list products on their store. Unlike Tmall, which has many shopfronts, this is just one large shop, like a department store with a focus on specific product categories. They will buy the goods wholesale and re-sell on the site, putting their own mark-up on the products and handling the logistics and customer interface.
- Specialty Market Places – Generally focus on more specialised lines or niche products, they usually buy wholesale and resell.
- Flash Websites – Are like flash websites at home, so the focus is on discount or one-offs. They can be useful to start a brand awareness campaign.
- WeChat Stores – Very popular now, allowing you to sell directly to your customers using a mini site or app. These are easier to set up and have now become more and more popular, but you will need to invest money on promotion to build up your brand awareness. You will also be responsible for customer service and fulfilment.
There is no one size fits all, you need to make your choices based on the products you want to sell.
Many brands choose an omnichannel approach, once they have gained traction in the market. Brands with a larger appetite will usually look to eventually having a retail presence in the future, integrating on and offline stores.
Whatever you choose, you must have an excellent understanding of the China market, which is why most companies will need representation there and this is where Third Party representation comes into play.
Your third party representative acts as your official reseller and basically becomes your right hand in China, managing your customers, distribution, logistics and online representation.
To understand your route to market, when it comes to cross border eCommerce, you also need to consider a new set of rules – and they are the import trade rules of China. These include Customs & Quarantine, Taxes & Tariffs, Payments and Warehousing Regulations and Logistics. It is crucial you understand all the requirements, even if you not handling these matters yourself.
So, how do you choose the best path for you?
Your budget will generally be the decider, and that means you will need to do your research.
Other things that will impact your decision include the rules and regulations, especially with regards to your product type.
It’s inevitable that you and your brand will need help in China and so choosing a representative is going to be necessary.
Ultimately you will want to select someone who not only has an in-depth knowledge of China plus local experience but they also need to have a deep understanding of your product category.