April 19th, 2017; Chain Store Age
One way for U.S retail companies to win in 2017 is to look beyond their domestic borders for growth. As retail executives implement this year’s business plans, they should consider embracing cross-border e-commerce in China to grow now, and in the future.
China is the world’s largest and fastest-growing e-commerce market. Cross-border e-commerce is experiencing explosive growth due to Chinese consumers’ desire for lower prices and higher-quality products.
According to McKinsey & Company’s report, “Partnering with China’s retailers: A guide for consumer-goods companies,” cross-border e-commerce will account for 9% of China’s total online retail market by 2018, because the process allows foreign brands to serve Chinese consumers without the additional risk and investment in local distribution capabilities.
Several categories of U.S. products face unprecedented demand in China through the convenience of overseas online shopping (OOS). Chinese consumers desire U.S. products and buy specific product categories more than others using cross-border e-commerce.
According to iResearch data, the following product categories are most in demand among Chinese shoppers — and represent growth opportunities for U.S. retailers through cross-border e-commerce:
1. Cosmetics and personal care (46%): Chinese shoppers enjoy the superior quality and prestigious status symbols of foreign cosmetics and personal care products. Chinese consumers are choosing to trade up to higher-quality personal-care products, including skin care and beauty, according to Boston Consulting Group. Top-selling U.S. cosmetics and personal care brands in China include Estée Lauder, Kiehl’s and Origins.
2. Mom and baby (39%): Recent cases of food poisoning and poor quality products led Chinese shoppers to increasingly perceive foreign products as safer and more trustworthy. In the infant and baby products category, Chinese consumers are most likely to trade up for superior quality, according to Boston Consulting Group. Best-selling U.S. mom and baby brands include Gerber, Earth’s Best and Carter’s.
3. Nutritional supplements (39%): Similar to the North American market, Chinese consumers have embraced a health and wellness lifestyle, including the consumption of nutritional supplements. GNC, NeoCell and Nature’s Bounty are among best-selling nutritional supplements brands.
4. Fashion and apparel (38%): Consulting firm A.T. Kearney found almost all (97%) Chinese shoppers bought fashion and apparel products online within the previous three months, compared to 87% of American consumers, according to A.T. Kearney. Top-selling American apparel brands include Michael Kors, Guess and Ugg.
5. Digital products (31%): Consumer electronics is a well-established category, with e-commerce reaching 30% of total retail sales in China, according to McKinsey & Company. In search of prestige and superior quality, Chinese consumers purchase such U.S. digital brands as Apple, Jawbone and Monster Inspiration.
U.S. retailers selling products in these in-demand categories can focus on growth — and eliminate common risks of expansion in China — by embracing cross-border e-commerce.
As the U.S. retail market continues to face unpredictable disruption, China will remain a lucrative growth market. American retailers can choose to seize the moment and satisfy strong demand for U.S. products in China by adding cross-border e-commerce to their 2017 business strategy.