A new study has found that 37 percent of Chinese online shoppers prefer to buy from Australia, yet only 21% of Australian retailers are satisfied with their sales in China’s e-commerce marketplaces.
The new research by Frost & Sullivan, in conjunction with Chinese retail strategy experts Azoya Consulting, also found that cross-border online shopping spending in China has exceeded US$100 billion.
This is almost eight times larger than Australia’s total online shopping market.
And 87 percent of Australian respondents see China as a lucrative market, with huge opportunities arising from affluent Chinese consumers seeking quality products from other countries.
But many of those respondents are finding it difficult to reach Chinese shoppers.
“With China now the world’s largest online shopping market, Australian retailers and brands need to consider the best approach to reach Chinese consumers if they want to take advantage of this booming opportunity,” said Mark Dougan, managing director, Australia and New Zealand of Frost & Sullivan. “The complexities and challenges involved mean a one size fits all approach isn’t appropriate to meet market demands. They need to carefully determine which model will work best for them.”
The study of 1,000 cross border online shoppers in China, as well as 100 international brand owners and retailers in Australia, New Zealand, the US, Canada and the European Union, was conducted in 2018 to understand the strategies, expectations and experiences of online sales in China.
Mid-size and large retailers with annual revenue of over US$50 million participated in the study, with 36 percent earning annual sales of more than US$1 billion.
Most popular products
According to the study, a quarter of China’s 500 million online shoppers purchased through cross-border e-commerce in 2017.
On average, these shoppers are spending nearly US$850 a year on cross-border purchases, with 60 percent expecting to spend more over the next 12 months.
Top categories include:
- Fashion (22 percent)
- Beauty and cosmetics (20 percent)
- Mum and baby (15 percent)
With Australian retailers and brands mainly targeting the mum and baby category, there are huge opportunities to expand into other categories to meet consumer demand.
The study reveals that 37 percent of Chinese online shoppers prefer to buy from Australia, behind Japan (72 percent), Korea (60 percent) and the US (55 percent).
There are however, distinct gender differences, with females favouring Asian countries, particularly Japan and Korea, while men have a stronger preference for products from Australia, the US and Germany.
Selling online is the primary approach Australian retailers currently use to expand sales into China, with 32 percent leveraging marketplaces, such as Tmall Global or JD.com.
However, only 21 percent of retailers are satisfied with their sales on these marketplaces.
Respondents cited challenges such as lack of direct customer access, high commissions eating into margins, upfront costs to establish marketplace stores and high levels of competition particularly around price.
“While Chinese marketplaces may seem an easy way to set up an online channel into China, they often generate disappointing sales and marketing results, particularly the lack of ability to connect directly with Chinese customers and to control their business,” said Mr Dougan.
“Marketplaces may not necessarily be the best approach for Australian retailers and brands in the long-term. Instead, they need to take a broader view to set up a smart channel strategy with multiple touchpoints to approach customers and command healthy growth for the business.”
Factors that influence purchases
According to the study, Australian retailers are investing in improving their own capabilities to conduct direct online sales into China. Despite this investment, however, significant gaps remain between the capabilities they need to serve customers in China directly and where they currently stand.
In response, 63 percent of Australian respondents plan on establishing a warehouse or distribution centre in China to meet inventory demands from consumers.
This is one of the leading factors that influence purchases from foreign suppliers, as well as payment options, easy to use websites and Chinese language customer support.
The study indicates that international retailers must focus on basic e-commerce capabilities to succeed in China, including efficient digital marketing, local logistics networks, a range of payment options, Chinese language customer service and content.
Also, they need a robust social media strategy, including partnerships with influencers or key opinion leaders (KOLs), and market trends to reach and engage Chinese consumers.
“To build a brand that Chinese consumers trust, which commands a healthy profit margin and repeat buyers, retailers need to approach customers through multiple touchpoints,” said Don Zhao, co-founder of Azoya International.
“Retailers are increasingly establishing their own websites as the core of their strategies to connect directly with Chinese consumers, accompanied with marketplaces and social media strategies, while at the same time retaining flexibility and control over their business.”
A more detailed analysis of the research can be found in the report: "The Cross-border eCommerce (Haitao) Opportunity in China" at https://shop.azoyagroup.com/