Cross-border online shopping in China has exceeded the US$100 billion mark but only a fifth of retailers say they are satisfied with their ability to reach Chinese shoppers online, new research has found.
Azoya Consulting and Frost & Sullivan surveyed 1,000 cross border shoppers in China and 100 international brand owners in Australia, New Zealand, the US, Canada and Europe for their new report assessing the size and sophistication of China’s cross-border e-commerce market.
They found that while more than a third (37 per cent) of Chinese shoppers prefer to purchase products from Australia and 87 per cent of local brands view the market as a lucrative opportunity, there’s a gap in brands’ ability to satisfy the market.
Only 1 in 5 satisfied with sales on marketplaces
The opportunity is sizable – of the 500 million online shoppers in China, 25 per cent made cross-border purchases in 2017, on average spending US$850 during the year overseas.
Almost a third (32 per cent) of Australian survey respondents are currently using channels like Alibaba’s Tmall or JD.com to sell to the Chinese market, but only 21 per cent were satisfied with their sales.
Common challenges included a lack of direct customer access, high commissions eating margins, upfront costs to establish marketplace stores and high levels of price competition.
Azoya chief executive Don Zhao said that businesses that have managed to be successful in China have a few common characteristics.
“They’re medium-sized and they have flexible sourcing, so they can source directly from suppliers and distributors … to quickly respond to market demand,” he said.
“If retailers are only sourcing from brands it will be difficult to keep their position in the market.”
63 per cent of respondents said they plan on establishing a warehouse or distribution centre in China to meet inventory demands from consumers.
Forging their own paths
Australian brands have been moving to capitalise on the emerging success of local products in China over the last decade, with the rise of the daigou phenomenon creating some success stories in the world’s largest market.
“If you’re expecting fast success, daigou may be the right approach, but it’s not the best if you’re a bigger brand,” Zhao said.
“Daigou is good for testing a certain SKU on the market, but as a long-term way to survive…that’s highly not likely to happen.”
The study found that Australian retailers are now moving to invest in their own platforms, with the hope of selling directly to the Chinese market, and Frost & Sullivan’s Mark Dougan said local brands were increasingly realising the limitations of marketplaces and adapting.
“There’s such a plethora of similar brands competing on same marketplace for consumer attention and thousands of products available that it’s very difficult to make customers aware of you. The marketplace also takes commissions which can significantly eat into retail margin,” he said.
“We’re not necessarily saying setting up your own website is the only option, but I think retailers need to put more thought into it than just going straight to a marketplace. There are alternatives and no one size fits all option. Every retailer has a different set of characteristics.”