So You’ve Decided to Enter China – Now What?

May 14, 2014 7:25 PM  By

china-ecommerce-850Anyone trading online understands that there is a tremendous opportunity if you can crack the International market.  Getting access to volume and growth markets is key, but you must also remember to look at your target market, the number of resources you have to support a new market and most importantly, return on investment.

Retailers looking to go international often have their eyes set on China in particular. China is, after all, the biggest opportunity for most online merchants.  To put this into context – the US Market is $343b growing at 11% with growth slowing in the future.  The Chinese market is $370b growing at 43% with double the amount of online shoppers of the US (372m vs 168m).

The most common statement retailers make once they’ve decided to enter China is: ‘I want my site in Chinese characters and to be able to accept Yuan.’  But, that simple statement evokes many additional questions that will likely lead to an extensive requirements gathering session. So, to put it simply, it is key for all retailers looking to enter China to understand that simply translating the site and using a currency converter to show the price in RMB/Yuan is not the answer.  You also need to consider the following:

Does your current ecommerce platform allow for multiple sites in multiple countries on one platform?

If your e-Commerce platform is not able to function internationally or offer translation, multi-currency, etc, it could be time to re-platform.  When looking at platforms it is good to have a 5 year plan with specific country by country requirements.  There are a lot of good platforms that allow you to roll out into new countries easily such as hybris which offers the ability to launch multiple sites and multiple brands in multiple countries through one platform.

Customer service – Fulfillment, Shipping & Returns

Will you local representation or use your existing infrastructure? If you don’t have local brick and mortar stores or even a warehouse, your customer experience may suffer. Shipping will take longer, and the return process could be difficult, adding an increased burden on the consumer.

SEO, Pay-Per-Click Advertising, Analytics

Baidu, China’s version of Google, operates much differently. You’ll need a supplier that understands international markets to help make sure your site is searchable and learn how to track traffic and enhance your strategies.

Payment Methods

Traditional credit cards like MasterCard and VISA do not exist in China. The equivalent is called UnionPay, which is starting to gain major traction in the international market.  According t

o China UnionPay, the total number of UnionPay cards issued worldwide has exceeded 2.3 billion to date, but this mostly consists of those who travel internationally.

For most local Chinese consumers, there is an extensive direct debit market.  For example Bank of China has its own brand cards that they issue to their consumers that are directly linked to the branches in each province (Beijing, Shanghai, Xianjing, etc.)  So when consumers pu

rchase online, the transaction occurs directly with the bank’s local branch as a debit from the cardholders account.

To allow these consumers to make purchases on your site, you need a payment gateway that has access to dozens of card types in China as there are a few dozen banks in China with the same system.  Retailers need to work with a regional Payment Gateway for the best coverage.

Are you going to open an office locally?

If you set up local operations in China, it is complicated and takes time.  The most common ways are a Joint Venture with local entity or Wholly Owned Foreign Entity (WOFE).  The WOFE must be government approved which again will take time, money and patience.

Overall, this process probably sounds like an intimidating nightmare. Working with an end-to-end e-commerce practice will help retailers navigate localized strategies.  To do it right, it can take many months to get your localized site ready. In the meantime, work with affiliate channels similar to Amazon Services that allow your products to be listed on major sites in China like Jd.com (formally 360 Buy) and Tmall. These are low-cost, quick ways to get your goods into China while you build your long term strategy.

Kami Kris is the General Manager at Loop Integration