China has now become the largest and arguably the most innovative retail eCommerce market in the world. By 2022, the overall market size is projected to reach nearly US$600 billion. To put things in perspective, the November 11th Global Shopping Festival in China nearly quadruples the size of America’s biggest shopping days Black Friday and Cyber Monday combined, garnering over US$25 billion of sales.
The core of the Chinese online shoppers consists of over 400 million millennial customers – a booming tech-aware segment familiar with third-party electronic payments (AliPay or WeChat Pay). More than 52% of Chinese consumers already shop primarily via smartphones versus 46% through physical stores.
The rapid adoption of mobile shopping and the proliferation of eCommerce platforms presents an ideal opportunity for global brands to capitalize on the lucrative growth. But who are the eCommerce giants in China?
The Taobao Marketplace (a subsidiary of Alibaba) draws similarities to Amazon. The platform allows free access for buyers and enables individual vendors or companies to list products online. A massive range of products – from stationary all the way to jumbo jets – is available on the web platform and the mobile Taobao application.
Tmall, on the other hand, only allows brand owners or authorized distributors that have a retail license to create a store. This is ideal for international brands to create customised products offering on Tmall. Businesses can open an online ‘flagship store’ which enables full control over product listings and overall branding.
Over 50% of visitors to Tmall, the B2C platform of Alibaba, are redirected via Taobao, reinforcing the symbiotic relationship between the two most-trafficked eCommerce sites in China. However, flagship store operators also have to consider fulfilment, distribution and shipping requirements as these platforms only serve as an intermediary.
JingDong (JD) Mall is China’s second-largest eCommerce platform by gross merchandise value — second to Alibaba’s Tmall. The business is based on the traditional eCommerce model where the company sells branded products from a large selection of manufacturers through its website and mobile applications.
One of the key advantages of JD is that they operate with ‘boundaryless retail’ and invests heavily in this area, even delivering to remote locations. JD has announced plans to create a logistics network of low-altitude drones that can carry up to one ton of goods. In addition, JD Worldwide allows international merchants to list and sell directly to Chinese consumers without a brick-and-mortar presence in China.
The ideal business approach for brands on JD.com is to take advantage of JD’s direct sales model where products would be sourced directly and sold by JD, with the option of customized product listing pages on the platform. While branding, promotion, and marketing are controlled by the parent company, the operations are solely handled by JD. This is the optimal go-to-market strategy for initial market penetration.
Moreover, JD.com offers an easy solution for accessing consumers on WeChat through the JD.com WeChat Store. WeChat is an integrated messaging application which enables the direct purchase of goods and services through third-party vendors and has approximately 900 million monthly active users. By integrating the entire product range into this unified social media and e-commerce platform, brands have access to a large base of contemporary Chinese millennials. Lastly, WeChat stores allow companies to address consumers’ questions in real time as a form of customer relationship management.
Suning.com is also one of the strongest eCommerce marketplaces in China, specializing in AI-driven, B2C and online-to-offline retailing. Suning owns a large chain of 4,000 physical retail stores focused on electronics in China. However, in recent years, Suning has grown its online presence and increased the product portfolio from electronic goods to all areas.
Both the strong online presence and distribution capabilities open up new opportunities for the growth of international brands through e-channels. Suning offers online-to-offline retailing opportunities with increasing omnichannel emphasis. Suning provides a major advantage as it allows customers to benefit from the concept of ‘smart retail’ and currently offers convenient and autonomous delivery options.
Suning works as a full-service e-retailer and employs a similar approach to JD’s direct sales model – Suning would source products directly from international brands, act as an intermediary online service and deliver them. Suning also offers the option of customized, dedicated design and interactive UI on the website including custom promotions, content, and videos.
Brands looking to gain a strong foothold in the largest eCommerce market in the world should explore the benefits of partnering with these online marketplaces. As consumer purchasing behaviour, autonomous logistics technology and social media integration continue to disrupt the e-commerce space in China, global marketing managers should take note – the gates of the proverbial Great Wall are open for business.