By Paul Galpin, Managing Director, P2P Mailing
The ecommerce landscape in China presents lucrative opportunities for overseas retailers. McKinsey & Co recently produced a report suggesting that the market will be between US$420bn and US$650bn by 2020.
Large scale retail brands such as ASOS, Burberry and Selfridges are looking to expand East into China and with good reason. According to the China Internet Network Information Center (CNNIC), by the end of December 2013 the country had 618m internet users, up by 53.58m year-on-year. This figure is twelve-times that of the UK and doubles that of the US.
Meanwhile the country’s recent concerns regarding counterfeit luxury items being sold online has led to an opening in the market for established foreign brands. Online shopping by its very nature requires a high level of trust between the consumer and the vendor, particularly as money is exchanged before goods are received. In a recent study by KPMG, 78% of respondents cited concerns about the authenticity of products bought online. With this in mind, there is a growing demand from Chinese consumers to purchase from reputable foreign online retailers who have built their status around safe and reliable delivery.
When targeting this market, overseas retailers should avoid a one size fits all approach to their delivery strategy. China’s online population is both large and diverse. It’s worth knowing that there are 30 cities in China with populations of over 10 million people. UK retailers looking to gain a foothold in China should initially begin distributing to the country from the UK directly. Typical delivery times from this approach are between six to eight days. Shorter delivery times are possible using premium express services at a greater cost per parcel. Once customer volume has increased substantially this opens the way for a local presence in the country. The timing of this next phase is subject to a number of issues such as risk levels of the retailer and the commercial success of brand launch in China. By having a local presence, delivery times can be reduced to next day or even same day.
Factors relating to regulatory compliance are also of key importance for overseas retailers. The EU-China Customs Cooperation Agreement provides a framework for customs cooperation and mutual administrative assistance between the EU and China. On the basis of this agreement European and Chinese customs authorities work together in a number of fields, such as the fight against intellectual property rights (IPR) infringements, supply chain security & trade facilitation, and the prevention of diversion of drug precursors.
The Chinese ecommerce landscape is an attractive proposition for online retailers particularly given the size and scale of the market. However, expanding into new territories is also associated with a range of obstacles. This should not deter online retailers from looking to export to China. While challenges exist, the rewards in having a delivery partner that can help you overcome hurdles and adapt very quickly to change are great. For many online retailers, engaging with a third party provider that offers market expertise and has strong relationships with both postal operators and in country distribution experts will be the most fail-safe and cost-effective way of managing distribution in this region.