PROFIT FROM CHINESE MARKET WITHOUT SETTING UP A PHYSICAL PRESENCE

Recently, the development of cross-border e-commerce makes it easier for foreign SMEs to enter China without a significant investment. In 2016, the size of importing cross-border ecommerce was US$54 billion, with an annually growth rate of 17.6% (2017 Q2). An Accenture/Alibaba report predicts that by 2021, the transaction volume of imported goods purchased online in China will hit over US$245 billion, making it the largest cross-border B2C market in the world. 

WHAT IS CROSS-BORDER E-COMMERCE?

Cross-border ecommerce refers to the commercial activity between trade entities from different countries. The trade process involves e-commerce platforms, payment settlement systems and cross-border logistics.

For consumers, it means they can buy imported products directly from foreign business. For the business, it means they can sell the products to foreigners directly from their own country. 

MAIN DRIVERS OF CROSS-BORDER E-COMMERCE

1. CONSUMER DEMAND: Consumers want access to genuine, quality, foreign products and are prepared to pay a premium for it.
2. GOVERNMENT PROMOTION: Businesses selling through cross-border enjoy reduced tariffs and lower regulatory requirements. (which is of particular appeal to the cosmetic, fashion, vitamin supplement and food sectors) among many others.
3. MATURE INFRASTRUCTURE: Advanced internet use, mobile payments, logistics, and advertising technology make China one of the best countries in the world for e-commerce.

For SME brands, this is perfect timing, as the cross-border market is still relatively easy to establish a presence before becoming too competitive.

THE ROADMAP TO CHINESE MARKET

Everyone knows that China is a lucrative but competitive market. Each year, foreign companies come here for success, but many of them struggle to survive, some notable examples like eBay and Uber. The main reason is they underestimated the competition and launched too fearlessly.

Unlike the traditional route of setting up a legal entity, hiring local talent and waiting for sales to convert, we propose a lean approach into China, with the plan of developing a sustainable brand through cross-border e-commerce.

1. MARKET TEST: This step aims at understanding the market and establishing initial brand presence. We recommend you testing the market with a lean campaign.
2. CROSS-BORDER SALES: This step is about brand promotion through selective distribution. You create your Chinese online shop and partnership with KOLs (key opinion leaders), who speak your story and promote the product. In the meantime, you can measure the KPIs, to see what works and adjust your strategy accordingly. The ideal outcome of this step is you have created a solid brand existence with a level of word-of-mouth promotion, while remaining profitable.
3. OFFLINE DISTRIBUTION: When a solid demand for your product or service has been established, the offline distribution can be implemented by working with local distributors, launching in top ecommerce marketplaces or even create a Chinese company. This will greatly help you if you plan to enter hundreds of 3Rd tier cities.

Don't waste money going offline in the beginning, leverage cross-border ecommerce to test your product. The initial growth should come organically, by crafting a rich brand experience step-by-step, which will always be your most valuable asset in China.