Why is e-commerce so successful in China

China as an eCommerce market - facts and figures

2.2 The Chinese customer

For most Chinese, 50% convenience is the number one reason to shop online. Followed by online payment security with 38%.
(Source: Statista, KPMG, YouGov, 2016)

Most Chinese eCommerce customers have a high income. Over 22% is over 8,000 yuan, which is around 1,000 euros at the end of 2017. That's a lot by Chinese standards.
(Source: Statista; CNNIC, 2015)

The most popular eCommerce product categories are lifestyle (66%) and fashion (61%). Premium products are only 14%.
(Source: Statista; KPMG; YouGov, 2016)

Compared to the US market, the professionalism of the Chinese market becomes clear. While Alibaba Payment already processed 120,000 transactions per second in China in 2016, leading US payment providers only made 38,000 transactions.

If you want to operate eCommerce in China, you should also take into account the Chinese holidays. Here is an overview of the most important holidays:

  • January: Chinese Lunar New Year
  • February: Chinese Lantern Festival
  • March 8: Qingming Chinese Festival
  • May 1st: Labor Day
  • June: Chinese Dragon Boat Festival
  • August: Chinese Valentine's Day
  • September: mid-autumn festival
  • November: Singles Day
  • December 12th: Double Twelve Sale

(Source: Azoya, Sell to China: Your complete Category Handbook, 2016)

3. Technical Notes on Internet Selling in China

Anyone wishing to operate their own Internet offering for China will face special challenges, which are outlined below:

3.1 Localization of your own offer

Of course, not only is Chinese spoken in China, but Chinese people also have a different cultural background than Europeans. As trivial as this statement may sound, the localization of your own offer is not.

Anyone who visits Chinese websites is sure to quickly notice how overloaded these websites are with us. The more minimalist design concepts that predominate in the West are rather conditionally suitable for China. The Chinese expect all the information they need to form an opinion about a product, while in the West the unique selling points are more in demand.

For example, refer to our article “Localization in e-commerce - practical tips using the example of China”.

3.2 "Great Firewall"

Several hundred thousand domains are regularly checked by the Chinese government in order to “protect” their own population from “dubious” content. Conversely, this means whose websites fail the test can be blocked. Websites with the following content are particularly at risk of being blocked:

  • pornographic content
  • Gambling
  • religious, political and anti-government content
  • News sites and blogs

Even if most companies do not consider themselves to be affected by this, comment functions for Twitter or Facebook are often sufficient to be blocked, as these social media channels are banned in China. Furthermore, you should check very carefully for “ambiguous content”. The large cultural differences in particular can sometimes have an enormous impact on symbolism and imagery.

3.3 Loading times

The importance of good loading times is now generally known and well researched in eCommerce. If you want to guarantee fast loading times in China, you don't have to go through the distance and the “Great Firewall”. Sometimes there are also infrastructure problems in the Chinese network.

Many companies try to counter this by running their Internet offers on servers in Hong Kong, for example. However, Hong Kong is part of China, but lies outside the “Great Firewall”. But even hosting in the Chinese heartland only partially solves the loading time problem, as infrastructure problems in China can also lead to high latency times.

3.4 SEO and SEM

Search engines are not as important in China as they are in the West, as search results in China are much more controlled by budgets. However, 70% of the Chinese use the Chinese search engine Baidu. Baidu works in a similar way when evaluating relevance, as we are used to in the West from Google and Co., but there are significant differences in some areas.

For example, Google works in such a way that the search engine “knows” exactly what important information is and where it can be found. At Baidu, however, the positioning already decides whether data is indexed at all. It is therefore even more important to position the important information and keywords as high as possible on the website.

“Content is King” also applies to China. However, it should be taken into account that Chinese websites are much more text-heavy than western websites. The hurdle to achieve a good ranking is even higher here.

The rating is comparable for the loading times. If a website is “slow”, this has a decisive influence on the page indexing.

3.5 Mobile offer

Over 90% of all internet users in China go online on mobile devices. This development is progressing even faster in Asia than in the west. In the West, the answer is generally “Responsive Design”. In other words, a website that adapts to the display options of the respective device.

In China, the approach is different. The focus here is on the mobile platform, which is one reason why most Chinese Internet offers are specially optimized for mobile devices.

3.6 Chat? - A must in B2B in China

In Germany, it is rather ridiculed, but a chat function is mandatory for the Chinese market, also in B2B business. Because the Chinese customers are used to negotiating during the ordering process. WeChat is now also known in Germany and offers suitable packages for this. WeChat has changed from a pure chat provider to a digital service provider in recent years. Today you can order a taxi via WeChat just as easily as you can communicate with companies and pay for your daily purchases.

The technical integration is still the smallest task. Chinese customers expect their questions to be answered within 3 to 5 seconds in the chat.

3.7 Take regionality into account

If you want to open up the Chinese market, you should deal intensively with the regions of China. Unlike Europe, China does not have a unified national market, but rather is made up of interlinked regional markets. These in turn are often the size of European nations.

3.8 Licenses

If you want to offer a website with commercial content in China, you need up to four licenses. The following overview of the various licenses that you need for a website in China comes from cdnetworks.com.

3.8.1 ICP license

The "Internet Content Provider" license is mandatory for all commercial websites. Regardless of whether it is an online shop or otherwise payments are accepted on the website. Any website that meets these criteria must display a license number at the bottom of the page. These licenses are issued and checked by the Ministry of Industry and Information Technology (MIIT).

3.8.2 ICP Beian

This is also a license from MIIT. It is mandatory for all company pages that deliver content via local Chinese IP addresses. Companies that do have to register their domain. ICP and ICP Beian are often confused with each other due to their naming, but are two completely different licenses. The ICP Beian must also be given at the bottom of the website.

3.8.3 PSP Beian

The PSP Beian is a license or registration from the Public Security Bureau. It is also mandatory for all websites in China.

3.8.4 Industry-specific licenses

In addition to this jungle of regulations and basic licenses, there may be additional licenses that are mandatory for specific industries. These include, among others

  • Press and media
  • Education
  • medicine
  • Pharmaceutical industry
  • Cultural establishments

Websites that do not have a license or that violate the rules of existing licenses are censored. This means that the domain will be blocked and will end up on the blacklist. It is extremely difficult to delete and unblock domains from there that have been blocked and added to the list. It is therefore advisable for companies to take care of the relevant licenses as early as possible.

Furthermore, companies should constantly keep an eye on the regulations in order to prevent possible consequences, because in some cases the regulations change daily and also differ from province to province. A good connection with the local authorities is essential.

3.9 Shipping

Delivery times are not a major problem for business in China. Rather the opposite. If products are delivered too quickly, Chinese customers often fear that the goods will not come from Germany at all. German shipping documents are therefore very important for acceptance in the Chinese market. Chinese buyers accept longer delivery times.

4. Conclusion:

The Chinese market is undoubtedly very exciting and will probably remain so in the future.

The 13th 5 year plan provides for a strong focus on the Internet and eCommerce. In addition, the Chinese SME sector will continue to grow steadily over the next few years. At the same time, the spread of high-speed connections is increasing to 70% for fixed connections and 85% for cellular connections.

In addition, the traditional Chinese openness to technology remains unbroken. In the future, too, this will mean that new technologies will quickly gain acceptance and establish themselves.
(Source: CNNIC, National Bureau of Statistics of China; iRelint analysis, 2017)

If you want to be successful, you should not only consider the potential, but also the cultural differences.