Winning China’s e-commerce market

Smaller companies are trying to tap the Chinese market potential for themselves. While the mantra was previously “all or nothing”, there are now strategies for SMEs to enter the market gradually. That’s because many solution providers have learned from the trailblazers’ own experiences.

Undisputed potential in China’s e-commerce market

The growth of cross-border online retail is limitless and China has led global revenue rankings for years. In 2019, the e-commerce market in China accounted for around EUR 768 billion. This meant it was ahead of the US (EUR 323 billion) and Japan (EUR 80 billion).

The dominance of data, platforms and social apps

Data is an important e-commerce driver. This is also true in China. Unlike in the West, the commercial use of data obtained from e-commerce is a common business model. Gaining important insights from the data and interpreting it correctly is a crucial advantage over the competition.

Online marketplaces remain the focus of trade.

In 2019, China was able to record the biggest growth worldwide in social media users, with 100 million people. Over 1 billion people use social media apps there daily. Millennials are also “mobile only” and spend an average of four hours every day on social media, a considerable part of this time on WeChat.

The ‘super app’ WeChat has become the core ecosystem in Chinese people’s lives, thanks to its penetration (over 1 billion users) and its numerous features for financial management, dealing with authorities, mobility and communication. Its advantages mean that it can be used as a convenient way to shop and pay.

For foreign companies, it is therefore advisable to have a presence on WeChat. Moreover, data-driven insights about key indicators can be gained, such as brand awareness, revenue, strategies and price points of competitors and the performance of possible service partners.

Opportunities and challenges for market development

The gigantic market is enticing, thanks to its 700 million online consumers and strong import growth promoted by the government. Online shopping festivals, such as Alibaba’s Singles’ Day, also raise revenue hopes, with Singles’ Day seeing sales increase by 26% to USD 38.4 billion. Almost half of Chinese shoppers purchased international brands. In the first hour of Singles’ Day alone, revenue of USD 13 billion was generated, which was more than Swiss online retail achieved in one year.

The challenges for Swiss brands lie in the high level of complexity and dynamism, as well as the cultural and regulatory differences of the Chinese market. Adding to this is the increasingly strong international competition. For example, 200,000 brands are listed on Tmall and Tmall Global, of which an increasing number, currently one third, are international brands. This leads to high costs when activating a brand, which is the basis for increasing brand awareness.

Awareness in the domestic market only of limited relevance for China

Unfortunately, it is often the case that popular brands in Switzerland and their products are often completely unknown in China. The newer the brand, the more likely it is that activation measures will be needed. An investment of 20% of the expected target revenue in measures to boost awareness and conversion is a rule of thumb that brands can use to shape their campaigns. For brands that already have familiarity in China, this percentage is correspondingly lower (6-12%). However, not all brands are completely unknown. As a result, it is worth determining the effective level of familiarity of the brand with Chinese consumers from data-driven studies.

Market entry using an all-in-one cross-border solution

With the “Your Gateway to China” solution, Swiss Post has a unique overall offer for Swiss SMEs.

Thanks to five modules and their components that can be combined, Swiss SMEs rely on a structured solution adapted to the Chinese market and the resources of smaller suppliers. In doing so, the companies do not have to forego individual advice and support.

Brands without their own presence in China

We advise brands who are new to the Chinese market to use a combination of these components (not an exhaustive list), which can be adjusted to the appropriate situation. 

Marketplace: Listing on WeChat for activation, promotion and product presentation.

Market sampling: Genuine market feedback on attractiveness, target customer group and sales potential by actively testing product samples with a comprehensive Chinese base of trial customers.

Chinese name: Development of a Chinese brand name to maximize promotion and sales potential, or for brand registration purposes. Simultaneous clarification of brand names that have potentially already been sought, and their penetration.

Promotions: Initial promotions and presentation of the brand and its products on Swiss Post’s WeChat channel. In this way, Chinese customers come into contact with the brand and can indicate their initial interest. The level of familiarity is therefore gradually increased.

Affiliates/resellers: Potential resellers are sought and contacted to market and sell the brand via their own channels. The resellers receive between 20% and 30% of the selling price as a commission.

Campaigns: The brand is prominently portrayed and marketed in broad-based campaigns from Swiss Post. This will happen for occasions such as major shopping festivals like “Singles’ Day”, “Double 12” and “618”.

Logistics: Ensuring end-to-end Switzerland-China logistics, calculation of customs-specific levies and optimization of product prices and product bundling.

Data subscription: Enhanced control and management, thanks to sound insights into the development of your own brand awareness and sales, monitoring of competitors and prices and the performance of service partners, such as any distributors that already exist.

Dedicated social media channels: More focused communication with the target customer group via your own channels (e.g. WeChat, Weibo, Little Red Book), promotions, education and customer retention measures, community management and customer service.

The tailored customer service assists companies with market entry, market warming and to boost brand awareness across all market development phases, with the ultimate aim of successfully including the brand in the Swiss Pavilion. You can request detailed information about the service here.

Companies which are already present in China can optimize their positioning and cost structure with targeted packages of measures that are based on the level of brand awareness.