China now boasts the world’s largest e-commerce market. Easy pickings for the UK’s small businesses, or is trading across time zones, language barriers and cultural differences more complex than that?
The numbers are certainly formidable. The country is home to an estimated 700 million internet users and B2C online spend now exceeds £50bn per quarter. Research by Oxford Economics predicts that the level of imports is set to rise by 5% each year until at least 2019, and that by 2020 the country will house the world’s largest luxury goods market.
But a market of such size is allowed to dictate its own rules. Mark Hedley of the China-Britain Business Council says that while trading with China can be a rewarding endeavour, it’s not an easy proposition.
“Businesses that have the right product and the right strategy can position themselves now to take advantage of the huge projected growth of the middle class,” says Hedley.
Quality products that help the buyer express their individuality sell particularly well, says Hedley. ‘Made in Britain’ has a certain cachet, if backed by a strong brand and a quality product.
The bad news, however, is that to crack the Chinese market, SMEs will likely to have to put aside everything they thought they knew about e-commerce success. And don’t be swayed by Singles Day, a consumer holiday in China and the world’s biggest online shopping day, which occurs on November 11 each year. Although it accounted for £9.6bn of sales in 2015, it’s just one day in the sales cycle and products need to be heavily discounted to garner any interest.
Entrepreneur James Armstrong runs several online ventures and acts as a consultant helping other organisations strike deals in China.
Armstrong explains: “China is a ridiculously huge opportunity for any e-commerce business, but the challenges are equally massive.
“China’s digital landscape is almost completely alien to anyone who didn’t grow up there. Sites like Tencent, Renren, Youku Tudou and Sina Weibo take the place of Facebook, Twitter and YouTube.”
The differences extend to an unfamiliar array of credit cards and payment methods. Alipay, the most widely payment processor used in China, is unheard of to most UK retailers.
And where British shoppers are happy to buy goods from retailers’ own websites, in China, centralised e-marketplaces such as Tmall and JD.com account for a vast majority of sales.
“Any company without extensive experience operating multilingual campaigns, preferably run by native speakers, will be hopelessly out-gunned in competing with local businesses,” says Armstrong.
“Dealing with manufacturers and distributors directly can be challenging. You usually have to try several before you find one who’s willing, and able, to work with you.”
China-Britain Business Council’s Hedley agrees with the dedication required when first entering the Chinese market.
“There is plenty of investment required to set up an online store. The technical support, customer service and fulfilment required typically means that businesses either need to set up a permanent office in China or find a local partner, and both will eat into your margins,” says Hedley.
Building a brand in the country needs careful consideration as well. “Marketing campaigns need to be run in the local language, and it’s not just a case of taking your existing website and translating them directly into Chinese,” says Hedley. “You have to be thoughtful of local nuances and tastes in terms of building a brand identity.”
“Then you have to get the product to China. You have to think about the logistics, the warehousing, and duties, which vary from product to product.”
Luis Arriaga, managing director, UPS UK, Ireland and Nordics, explains how clearing customs in China can depend on brokerage documentation being properly completed with the correct value and description of the goods. SMEs must also be sure the correct VAT and import duties are applied.
He adds: “Chinese customers have rising expectations about the delivery of the product they purchase online. Partnering with a logistics company that can provide high value services to shoppers in China will reap many business benefits.”
Despite the high barriers to entry, selling into China can be a rewarding endeavour says Justine Rogers, founder of Dainty Dizzy.
The childenswear business began as a hobby only a few years ago, but now sells its intricately designed, handcrafted special occasion dresses throughout UK and across the globe. The mix of quality and quirky Britishness perfectly suits China’s demand for novel luxury goods.
Dainty Dizzy managed to break into the market by first pairing up with retailers that had already done so. The clothing is available through known sites such as Childrensalon, one of the industry’s biggest names, which already had a presence in China.
The ‘seal of approval’ earned from working with a reputable company led to wholesale orders from Chinese retailers, followed by individual consumers ordering direct.
Rogers says: “China is unique. Understanding the culture before you go in is very important. Customers really warm to politeness. Rudeness is a big no-no, and you can lose a relationship that’s been built over years by appearing disparaging in an email.
“It’s also important to understand the lengths to which some will go to save the smallest amount of money, including waiting until the exchange rate drops to pay. We set up a US dollar account to get around this.”
Overall, Rogers says the association with Childrensalon was key to the company’s early success in China.
“Our next stage is to go out there, appear at a trade show and market ourselves more directly. But I certainly wouldn’t have done that step first, we’d have wasted a lot of time and money.”
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