China is the world’s largest e-commerce and retail market, with Chinese consumers accounting for almost half of global e-sales. Chinese e-commerce sales are expected to reach US$1.13 trillion in 2017, a figure equal to 23.1 per cent of the country’s total retail sales—e-commerce is expected to account for 40.8 per cent of Chinese retail sales by 2021.
To put the size of China’s online trade into perspective, there are more people shopping online in China than the population of the United States.
This is an enormous market, and the opportunities it presents for Canadian exporters are beyond measure.
As China transitions from an export-focused manufacturing economy to a service and consumption-based economy, the market for the consumer goods its burgeoning middle class craves is growing. E-commerce presents a way to reach these customers that is more efficient, cheaper and less risky than the traditional route of setting up brick and mortar stores.
Alibaba Group controls roughly 80 per cent of online trade in China. They are the biggest player on the block, and for Canadian companies looking to sell online in China, Alibaba is the primary gatekeeper to this sales channel. This global e-commerce firm is making a strong push to get more Canadian businesses onto its portals and selling their goods into China:
Accessing China’s e-commerce bonanza
China is the largest online and retail market on Earth, and Alibaba, its largest player, wants more Canadian companies to get in the game
Alibaba has several online platforms.
TaoBao Mall (or Tmall), its business-to-consumer portal, allows business entities to sell their unique goods and branded products to Chinese consumers.
TaoBao Marketplace (or TaoBao) facilitates both business-to-consumer and consumer-to-consumer transactions. Individuals or corporations can sell their goods on TaoBao, and everything from sneakers to helicopters are traded on the platform.
You need to operate a legal business entity to get set up on Tmall, so if you run a sole proprietorship, TaoBoa is your entry-point. Incorporated businesses do operate on TaoBoa, but there is less control exercised by Alibaba over what is sold on the platform.
Larger companies tend to prefer Tmall, as there are stringent regulations against counterfeiting, and customers are generally willing to pay higher prices for products they know are genuine. Tmall also provides more robust infrastructure and services for vendors. However, getting set up on Tmall is an extensive and expensive process, and vendors are beholden to more oversight by Alibaba. Conversely, vendors on TaoBoa have a lot of autonomy.
Check out this English guide for setting up a shop on TaoBao. You will need an account on Alibaba’s payment platform Alipay to do so.
Canadian outdoor clothing manufacturer Arc’teryx has been using Alibaba’s Tmall platform since 2013. Through e-commerce, the company is tapping into growing Chinese enthusiasm for outdoor sports and activities by providing the clothing and equipment Chinese consumers need to hike, camp or ski.
Adam Ketcheson, Arc’teryx’s vice president of Marketing and Business to Consumers, says that e-commerce is the best way to sell consumer goods into the Chinese market:
Clearwater Seafoods, an Atlantic Canadian seafood firm, has traditionally operated under a business-to-business model, but its executives say e-commerce has provided them with a channel to sell their products directly to consumers in China, the country that consumes more seafood than any nation on Earth:
Canadian shoemaker Aldo is also taking advantage of Alibaba’s platforms:
Alibaba recently hosted an event in Toronto introducing Canadian exporters to its services:
Here is Prime Minister Trudeau’s key note speech from the September event:
Alibaba isn’t exclusively a business-to-consumer driven firm.
Alibaba.com is described as the world’s largest business-to-business portal, connecting Chinese firms with businesses in 200 countries and regions across the globe.
Sellers on Alibaba.com are typically manufacturers, suppliers and distributors.
If you want to sell industrial or sector-specific products into the Chinese market, or are looking to purchase components, materials or manufactured products for your business, Alibaba.com is a good place to start.
Alibaba.com provides a request for quotation service that allows you to advertise what you need and the exact quantity, as opposed to searching through pages and pages of results.
Despite increased shipping costs, buying from Chinese manufacturers instead of those in North America can actually save you money when sourcing the goods you need to operate.
“There isn’t a conflict between sourcing from China and selling to China. You could source the paper you put in your printer in your office from China. You can just get it cheaper than you can from Staples,” said John Caplan, CEO of e-commerce firm OpenSky—an Alibaba partner. “If you can make your sourcing more efficient, you can take those margins and invest them in your marketing. Every CEOs job is prioritizing how they spend their money; if you can pick a margin and improve the quality of your sourcing, you can redirect those resources to how you sell your product.”
Alibaba.com offers customs clearance services, VAT refunds, trade financing and logistics services.
Jingdong, more commonly known as JD, is China’s other e-commerce giant.
JD does not offer a market place for sellers, but instead sells directly to customers. As a business owner, you can either supply your products to JD, which then sells them directly to Chinese consumers, or sell your products on your own online store using JD’s open platform.
JD provides shipping, warehousing and customs clearance services, as well as last-mile delivery. The company prides itself on controlling every step of the logistics process, which it says ensures quality control.
Information about and access to JD.com Worldwide, the company’s international commerce channel, can be found here.
Here is Josh Gartner, JD’s vice president of International Corporate Affairs, speaking about the company’s China wide logistics network:
To bridge the gap between it and Alibaba, JD has formed partnerships with Walmart in China and Tencent, the maker of the popular Chinese messenger app WeChat and payment service WeChat Pay.
In October 2017, JD launched a platform specifically for luxury goods, called Toplife, which sells high-end fashion, jewelry, watches, health and beauty, home furnishings, cosmetics, and electronics to discerning consumers:
Google left China in 2008 over government censorship and hacking concerns, so your search engine optimization (SEO) and any site you are going to host in China need to be optimized for Baidu, China’s most used search engine.
If you are planning to build a website to sell your goods to Chinese consumers, it needs to be registered and hosted locally. Because of firewall and connectivity issues, foreign web addresses can take 30 seconds or longer to load—for e-commerce customers in any country this is enough to turn them away from your website all together.
Register your site with a .cn web address and seek the expertise of web development companies with experience building Chinese sales websites.
One such company, Web Presence in China, specializes in web development for locally hosted Chinese sites, SEO for Baidu and marketing to Chinese consumers.
Shopping by way of mobile phone is becoming more popular than ever in China.
According to a July 2017 study by research firm eMarketer, by the end of 2018, more than 75 per cent of e-commerce sales in China will be transacted via a mobile device—this represents over US$1 trillion.
If you are going to sell your products on a website in China, it needs to run smoothly on mobile and have a mobile friendly layout, or you will lose a lot of potential customers.
Singles’ Day is the biggest online shopping event in the world.
The unofficial holiday, November 11, was started in the mid-1990s by university students who wanted to organize activities for singles. The day grew in popularity over the years, first observed only by young, single men but eventually being adopted by young women, until it took on a completely different dimension in 2009.
2009 was the year Alibaba had its first Singles’ Day sale on its Tmall platform. JD joined the party in 2010, and since then, e-commerce sales on November 11 in China have exploded.
In 2016, Alibaba pulled in US$17.8 billion on Singles’ Day, and while JD didn’t post sales numbers, it says it saw a massive spike in orders on Singles’ Day 2016 (up 78 per cent from 2015).
To put Alibaba and JD’s success on Singles’ Day into perspective, Cyber Monday—the Monday after U.S. Thanksgiving and the largest e-commerce shopping day in the U.S.—only managed to produce $3.45 billion in online spending in 2016.
Singles’ Day in China is a landmark event, and if you are going to sell your products online in China, it’s something you need to mark on your calendar—plan sales and promotions accordingly.