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US retailers have long way to go to reach Chinese shoppers online

By William Hennelly in New York | China Daily USA | Updated: 2018-05-17 05:46
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With China's online sales expected to exceed $1 trillion this year, only 20 percent of US and foreign retailers are satisfied with their ability to reach Chinese shoppers, according to a recent survey.

More than 80 percent of retailers see China as a lucrative market, as affluent Chinese consumers seek high-quality products from overseas.

However, only 20 percent of retailers feel confident in their capability to succeed in China's e-commerce market, according to a research report titled "The Cross-border eCommerce (Haitao) Opportunity in China", released on Monday by New York consulting firm Frost & Sullivan, in partnership with China retail strategist Azoya Consulting.

The survey focused on midsize and large retailers with annual revenue over $50 million; 36 percent of the retailers have annual sales of more than $1 billion.

Some interesting takeaways from the report are that overseas retailers may do better with their own standalone websites, and that Chinese men trust products from the US most, while Chinese women prefer South Korea.

Increasingly, Chinese cross-border shoppers are looking beyond giant marketplaces such as Tmall and JD and are shopping on retailer or brand-owner direct-to-consumer (D2C) online stores, which can offer greater personal engagement.

The survey found that Chinese shop cross-border, which they call haitao, to access higher-quality, trusted products (67 percent of online shoppers) and reduce the risk of counterfeits (45 percent).

The top shopping categories were fashion (bought by 22 percent of online shoppers), beauty and cosmetics (20 percent) and mom and baby (15 percent).

Chinese shoppers prefer to buy from companies in Japan (72 percent), South Korea (60 percent), the US (55 percent), Australia (37 percent), France and Germany (both 26 percent) and the UK (23 percent).

Women spend $976 on average per year, 20 percent more than men. Men seek fast delivery; women seek Chinese-language customer support and relevant content on the supplier's website. Women are more likely to use an overseas supplier's standalone direct-to-consumer website (21 percent vs. 18 percent of men).

Factors influencing cross-border purchases include Chinese consumers' expectations of a range of payment options, along with efficient website performance.

Among retailers, 37 percent currently are satisfied with their online sales in China using a global e-commerce vendor; 31 percent are satisfied with their standalone online store; and 21 percent are content with sales through online marketplaces, such as those owned by Alibaba (Tmall) and JD.

Alibaba Executive Chairman Jack Ma has famously called for US retailers to put their goods on Chinese e-commerce platforms.

But those marketplaces' crowding, intense price competition, commissions and high upfront costs have led more foreign retailers to create dedicated Chinese websites for direct customer access, greater control and higher net margins, the report said.

Retailers are looking beyond marketplaces as their only inroad, especially if these companies have a long-term sales strategy in China.

"To build a brand that Chinese consumers trust, which commands a healthy profit margin and repeat buyers, retailers need to approach customers through multiple touch points. The key channel should be within retailers' control, accompanied by supplementary platforms," said Don Zhao, co-founder of Azoya International.

"More and more retailers are establishing standalone websites as the core of their strategies, as these sites directly connect retailers with Chinese consumers who desire foreign brands while empowering retailers with flexibility and control over their business," he said.

The report suggests international retailers focus on basic e-commerce capabilities, including digital marketing, local logistics networks, a range of payment options and Chinese-language customer service and content.

Retailers need a sound social media strategy, including partnerships with influencers or key opinion leaders, and must understand market trends to engage Chinese consumers, the report said.

Contact the writer at williamhennelly@chinadailyusa.com

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