November, 2017; Digital Commerce 360
Same-day delivery of online orders is commonplace in China, but U.K. cosmetics and perfume retailer Feelunique doesn’t worry that orders placed on its Chinese e-commerce site take 10 working days to get to a Chinese shopper.
“It may seem long, but actually it’s part of the consumer journey: You’re buying something from far away and waiting for it is part of the experience,” says Feelunique CEO Joel Palix. “It’s also proof that the product is genuine.”
The latter point counts heavily in China, where consumers are often skeptical of the quality and safety of domestic products. That’s one reason Feelunique keeps its China site consistent in presentation with its eight other websites that are mainly geared to European and North American shoppers.
“We’ve not tried to make the site too Chinese, because one reason for consumers to shop cross-border is to make sure it’s a foreign site,” Palix says. “It should have the convenience of a shopping site for China, but the characteristics of a foreign site.”
"Chinese consumers buy not only by searching themselves, but also by receiving push notifications of interesting products."
The term “cross-border” has a particular significance in China, where the government has created special rules for what it terms “cross-border” online purchases by consumers buying items from foreign websites for personal use. Part of those rules include expedited customs handlings and, in some cases, lower tariffs. They also include an exemption from China’s regulations that require animal testing of many products, including cosmetics. Products purchased online by individuals only need to be approved for sale in their home country to be able to enter China under the cross-border rules.
A recent product featured on the Chinese site for Feelunique.
That’s important for a retailer like Feelunique, No. 243 in the Internet Retailer 2017 Europe 500, because many Western cosmetics brands don’t do animal testing as a way to cater to consumers concerned about animal welfare. A retailer like Feelunique that holds its inventory in the United Kingdom and ships to Chinese customers under the country’s cross-border rules can offer some brands for sale online that Chinese consumers could not find in bricks-and-mortar stores.
And Chinese shoppers are buying from foreign websites in growing numbers. Goods entering through China under the cross-border regulations typically go through customs in so-called free-trade zones in 13 major Chinese cities. As evidence of the demand for foreign goods, the value of merchandise processed through those 13 free-trade zones totaled $15 billion in the first six months of 2017, double the amount during the same period last year, according to China’s Ministry of Commerce.
The consumer demand and relaxed cross-border regulations have helped Feelunique gradually increase the number of brands that allow it to sell in China. Palix says he can now offer on the retailer’s China site nearly 400 of the 500 brands available on its U.K. site.
While Feelunique handles delivery to Chinese consumers, the retailer relies on a local service provider, Azoya International, for managing much of the China operation. Azoya helped Feelunique develop its China website, which launched in October 2015, and it handles marketing, merchandising and customer service.
“A big strength of Azoya is its ability to understand not just the Chinese consumer but also the Chinese internet, and to have all the technologies in place to quickly adapt to the fast-changing Chinese internet,” Palix says.
That includes being able to work with Chinese social networks like WeChat, which are playing an increasingly big role in online retailing, as well as the Baidu search engine. Azoya also managed Feelunique’s connections with local payment systems like Alipay, which is affiliated with e-commerce giant Alibaba Group Holding Ltd., and Tencent Holding Ltd.’s TenPay.
Feelunique’s online sales are growing rapidly in China, and will reach $20 million this year, about three times the level of 2016, Palix says. Earlier this year the retailer reported 80 million pounds ($106 million) in global sales for its fiscal year that ended March 31, 2017, and said it was on track for 100 million pounds in sales this year. 96% of its sales are online, Palix says.
While many consumer product manufacturers sell on the big online marketplaces in China, such as Alibaba’s Tmall and Taobo as well as JD.com and Amazon.cn, Palix says the high costs associated with those marketplaces kept him from going that route.
For example, Tmall, the shopping portal that has attracted thousands of foreign brands—60,000 overseas brands sold on Tmall during the recent Singles’ Day online sales extravaganza Nov. 11—charges a security deposit of at least $16,000, plus fees based on the merchandise category. For cosmetics, there is an annual $5,000 service charge plus a commission of 4% of sales.
On top of that, brands typically advertise so their products will show up high among the millions of items available on Alibaba’s marketplace and other big Chinese shopping sites. Total charges can run between 15% and 30% of a brand’s sales on a Chinese marketplace, industry experts say.
While he would not disclose the commission Feelunique pays Azoya, Palix says, “We have the constraint of being a retailer and working with thinner margins. Azoya offered a solution compatible with those thinner margins.”
The advantage of working with established shopping sites like Tmall, JD and Amazon China is that Chinese consumers regularly visit those sites. Attracting consumers to a new retail website can be a big challenge.
Palix says Feelunique acquires customers in China in several ways, including through push notifications to users of WeChat, the social network that’s widely used in China. “Chinese consumers buy not only by searching themselves, but also by receiving push notifications of interesting products,” Palix says.
The retailer also markets via the dominant search engine, Baidu, and has brought Chinese celebrities and opinion leaders to the United Kingdom to visit its facilities and report back to their followers on social media. “We have a lot of activities to get the name Feelunique known and respected in China,” Palix says, “and to create excitement around our brands and products.”