Chinese consumers remain immersed in a national online shopping frenzy, filling their shopping carts with merchandise from around the world last year.
The increased interest in overseas products offers Australian retailers a huge opportunity to take advantage of a booming market, but they also have to compete amid a growing price war.
With Amazon announcing its tailored Prime service for Chinese consumers in October, and Alibaba giving Tmall Global a bigger presence, cross-border ecommerce continues to go from strength to strength, despite many believing the industry now suffers from too many regulations.
Increasing sales and the popularity of overseas shopping are signs China’s affluent masses are upgrading their consumption.
This is great news because the market volume is expanding and more Australian brands will be able to find a niche in China. It also means competition is fierce, forcing retailers to find new ways to stand out and attract sales.
China’s biggest online shopping event, Single’s Day in November last year, set a record-breaking 254 billion yuan ($50 billion) of total sales.
The event’s initiator, Alibaba, recorded a billion yuan in sales in the first 52 seconds after the event started at midnight. It achieved 10 billion ($2 billion) in just three minutes.
Many retailers offered significant discounts for very short periods to create a sense of urgency.
Although a number of retailers and brands still sell at steep discounts, the proportion is relatively small.
While top-selling products have little or no margin, they serve as incentives to encourage customers to buy ‘long-tail’ (less popular) products.
Retailers are aware of the real risk that customers could switch to a competitor offering better deals.
Australian retailers should build their strength in the Chinese market by optimising logistics, building brand awareness and providing better customer service.
These are tested methods and would guarantee cost reductions and strengthen customer loyalty. This is also means better quality products and services will be sustainable for Chinese consumers.
The latest Mckinsey & Company study on Chinese consumers shows that with improvement in their financial status, Chinese consumers are spending more on a wide variety of higher-quality and pricier goods and increasingly buying more services.
This was demonstrated last year, when several Chinese online celebrities toured Australia, New Zealand, UK, Japan and Germany to gain a better understanding of the authenticity and reliability of local ethical products.
They visited stores and warehouses of several retail businesses that have established ecommerce businesses in China – Pharmacy Online, Pharmacy 4 Less, Amcal, Pharmacy Direct, Kiwi Discovery, Feelunique, Matsuya Ginza and Bodyguard Apotheke.
The celebrities shared their experiences online and the tour was broadcast on live-streaming channels. This gave Chinese consumers a glimpse into how their favourite products were packaged and distributed, showcasing the quality of the products they planned to purchase.
This campaign helped participating retailers develop more effective and rewarding channels, as well as better understand what Chinese consumers needed and wanted.
It demonstrates how global retailers, including Australia, can drive awareness of their brands and products in China to expand their ecommerce businesses.
How can you compete?
Six tips to help you differentiate your retail business in China:
1. Content is key: Before a sales event, create exclusive content to share with consumers that offers inspirational ideas the Chinese buyers generally know little about, such as a glimpse behind the scenes. Great content can generate consumer interest and initiate them to share via social media.
2. Be flexible in merchandising: Closely monitor your sales figures and inventory during sales periods; be flexible to make changes to lists accordingly; check top-selling products and enhance their promotion in various channels to maximise sales. Also bundle long-tail products with top-selling products to stimulate sales.
3. Good planning and management of inventory: During sales events, it’s easy to run out of stock of top-selling products. Make sales predictions at least eight weeks in advance and find an optimum shipping and logistics route. Setting up warehouses in free-trading areas such as Hong Kong is also a popular option.
4. Variety of marketing channels: Maintaining traffic is becoming more expensive, so it’s important to adapt your business model to other suitable and emerging marketing channels. Unlike marketplaces where all brands and retailers compete on the same platform with the same traffic, your ecommerce site or WeChat store will be less affected by having more flexibility in traffic choice. It also encourages more loyal and engaged customers to come back regularly.
5. Building loyalty: Due to the time a sales event lasts, inviting existing customers back for repeat purchasing is more effective than competing for new traffic. However, this requires that retailers improve shopping experiences, provide useful content regularly, invest in branding to retain customers and offer incentives to encourage repeat shopping.
6. Provide superior customer service: Although creative marketing campaigns can help retailers and brands stand out, customer service and product quality are the major concerns of most shoppers after sales. Superior customer service is where you can differentiate your business.
If your business is thinking of expanding its footprint in China to capitalise on the country’s booming cross-border online shopping market, then you need to consider different avenues to reach consumers, stand out and take your ecommerce business to the next level.
• Sylvia Wei is Azoya’s deputy managing director for Australia. Based in Melbourne, Ms Wei delivers the value proposition of Azoya’s cross-border e-commerce solutions to retail customers and prospects in Australia, as well as establishing the company’s local partner network. For more information, visit: http://www.azoyagroup.com/