If you’ve ever gone out for a long drive, you may have stopped for gas or snacks at an old country store. It’s possible that you got out of your car, walked up to the front door, pulled on the handle and found the door locked, in the middle of the day no less. Then as you glanced down in disappointment you may have actually seen a cardboard sign that read: “Gone Fishing.” For a country store owner that serves only a trickle of people on a busy day, there’s no harm in closing shop. This is the world of yesterday. Ecommerce store owners never close. In fact, many are obsessed with penetrating new markets, even if it’s as far away as China.
Doing business in China has been on everyone’s mind lately. The daily news is saturated with China commerce, China economic, and China internet reports. But outside of China daily news reports, how might one further explore doing ecommerce business in China?
Linkedin provides many discussion groups; among them is one labeled “China Internet Professionals.”
These discussion questions were posed to the group recently: Are the Chinese buying online? Any stats. on this? I’ve known some large U.S. companies to hold off on ecommerce in China because they say Chinese aren’t shopping enough online yet.
Responses:
Pascal Coppens:  Non-sense. Chinese buy a lot on-line, especially on Taobao. Low price is higher motivator than service or convenience, and that might actually be hard for US companies to value.
Jonathan Poston: I’ve heard of Taobao, but can anyone say whether China is a good place for the individual specialty (foreign) ecommerce merchant to open shop? Anyone having success with their ecommerce store in China?
Tait Lawton: We actually haven’t used Taobao much in a direct sense, but it is huge! It’s often the case that we work with brands directly, they sell their products to distributors within China, and then they end up on Taobao as well. I wouldn’t mind running a small Taobao store myself just for the experience or perhaps helping somebody else with their Taobao store.Anyways, to answer the original question, according to http://research.cnnic.cn/html/1279173730d2350.html (Chinese, published in July 2010), there are 140 million people in China that shop online now; online shopping and online banking has increased 30% since last year. According to my summary of the previous report (published in January 2010), “108 million online shoppers in China pushed the total value of online shopping transactions in China to 250 billion Yuan (about 36.5 billion USD) ‚Äì double what it was in 2008!” So, uhhh, ya, people shop online in China.
Jonathan Poston:  But are the Chinese buying from independent (not Taobao affiliate or other mass shopping mall/ebay etc. type of ecommerce site) ecommerce merchants?
Pascal Coppens: If they can get a good deal = yes! The challenge is how to beat Taobao in price, availability and delivery. Groupon clones are huge in China now, so if a deal can be made, Chinese will shop online. Exclusivity is also good for online shopping in China. Chinese often buy online because they want goods today, not tomorrow. People are often buying online whilst they are on their break of the 10 hour working days. There is a great delivery service market in China to accommodate fast and cheap delivery. You can Fedex next morning delivery for a 2 Kg package from Shanghai to Nanjing (3 hours train away) for 1.5 USD. I was told goods have to be >15 USD value to make it worthwhile to start an online shop. Not sure if that is correct though.
Jonathan Poston: Thanks Pascal, so in other words unless you’re a discount shop or part of some large mall, there’s no use. Do you mean $15 product value just in China or in general? …many stores here in the U.S. do fine with a wide variety of prices, depending on the industry. Online shoppers may also tend to buy packages of the lower priced goods to meet free shipping minimums etc.
Stefan Kohlmeyer:  Hi Jonathan. I launched my first e-commerce site with Bertelsmann in China in 1997 and with BOL China the first full fledged online media store in 2000. We have been by far too early at this time as all the mail order / e-commerce fundamentals like logistics and payment systems were not ready at that time. This situation clearly changed and there is little wonder why e-commerce is soaring these days. Though market place players like Taoboa are still taking approx. 80% of the market space, it is expected to evolve into a 50:50 balance between market place and e-tailing by 2020. And this is then a whopping $300 billion market place for the e-tailers alone!
Currently more and more of these e-tailing shops are popping up, initially utilizing Taoboa to boost their sales. I think a 50:50 balance is not unlikely, especially when seeing brands like Lining (the Nike of China) or Mecoxlane (biggest mail order company) investing heavily into e-commerce. The question is not if the market is ready (as it is), but what is the right market entry strategy for a foreign e-commerce player. They often underestimate that local e-tailing players like Dangdang ($40 million), 360Buy ($181 million) or Vancl ($170 million) had a substantial investment to get into a leading market position, hence expectations of a foreign firm have to be managed well between risk and opportunity. If this is a balance, the first hurdle is taken.
The next big hurdle is if these foreign companies are willing to adjust their business model and management to the local market conditions. Over the past 12 years I have seen too many foreign (internet) heavyweights (AOL, E-Bay, Google, Bertelsmann, etc.) who did exactly the same mistake and failed miserable. The only smart one (at that time I thought they are completely nuts) is Yahoo, who acquired 40% of Alibaba for $1 billion and passed their entire search business to them. I guess this investment is now worth approx $3 billion. Well done!
To continue this discussion on China e-commerce,  please feel free to post your opinions on this blog.
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It is a complicated issue. To be briefly, I have to separate two kind of ecommerce. The first one is the big name brand, like NIKE, Adidas, SONY, DELL, HP, they do sell their products online like they did in US. I will say this is B to C model. The next one is C to C model, like we do our own business on Ebay in US or Taobao in China.
I guess you want to know more about C to C. The main difference of Taobao and Ebay is Taobao is free to sellers. No registration fee, no selling fees. And this is the first reason of Taobao beat Ebay China (Yique). According to my information about Taobao, it will continue this free policy for a long time. Secondly, not only big malls or big discount can surive in Taobao, but also some special stores. For example, you asked about can foreigners succeed in Taobao, the answer is yes. Especially for some foreign products. For example, Apple Ipad is not sold in China, so there is a chance for you to purchase ipads in US and sells in China. The profit is big sometimes due to the supply and demand. The next big one is health product, this is also good sold in China.
Further, the regulation about ecommerce is not well developed in China. The first big issue is tax problem. If you sell something on Taobao, I heard this news two years before, you do not have to pay tax no matter you are buyer or seller. So this is a huge blank.
FYI: There are still lots of online C to C website other than Taobao. Like QQ shopping, Vancl (For clothes).
Thanks for weighing in on this Lance…if you have more information on how B to C ecommerce store merchants (especially those who have a store under their own url) are doing, that would be great.
Dear Jonathan,
A good approach to Chinese eMarket is to use Taobao as suggested before (B2C oriented) or Alibaba, a huge B2B eMarketplace (in fact is one of the largest eMarketplaces in the world), depending on your objectives. You can use this platforms to see if your products have a good reception, to test the results before investing in opening a shop, so you would take less risks. You can also find another eMarketplaces focus on China in the directory on our website, http://www.emarketservices.com, to find those that fit your goals.
Hope you will find it useful!
Best regards,
eMarket Services Team
Suggest check out http://www.jumbomart.cn
they have their own portal and also enable global brands like phillips b2c sites and well known china brands also.
traffic for B2C sites are cyclical like in the US. One difference is there is little traffic during national holidays when people go back to their families, and big spikes around promotions , special events.