China has long been an interesting market for international brands. There is an opportunity for them to develop this sales area in cross-border e-commerce, among other things. Laura Laubinger, Managing Director of Oddity Asia, reveals what this is all about.
The aftermath of the corona pandemic is hardly noticeable in China’s economy, which is also reflected in the forecasts. Economic experts expect gross domestic product to grow by 9.3 percent in 2021. E-commerce is likely to have a significant share in this again, with sales volume of almost two trillion euros in the B2C segment as early as 2020, according to the United Nations Conference on Trade and Development (UNCTAD). Cross-border e-commerce in particular is an important driver in this field for international trade. In total, Chinese customers bought goods worth 220 billion euros via cross-border e-commerce (CBEC) in 2020. This equates to 31.1 percent of China’s international trade and highlights the potential that China holds for international brands – especially if they use CBEC.
How exactly does cross-border e-commerce work?
CBEC means the online sale of products across national borders. European brands can sell their goods in China via special e-commerce platforms, such as Alibaba’s Tmall Global, without being based there themselves. These platforms often interface seamlessly with their mainstream variants for domestic products. In contrast to traditional imports, brands have the opportunity here to offer their products without the otherwise necessary registration with the Chinese authorities – and the associated considerable bureaucratic effort. In order to guarantee the shortest possible delivery times, brands can store their products in a so-called bonded warehouse, a duty-free warehouse in a free trade zone on Chinese soil. Just as with direct shipping from Europe, with the Bonded Warehouse solution, import taxes and duties are only due after a product order has been placed. Because the products are only officially imported into China when they leave the free trade zone.
In addition, the storage costs in the free trade zone are often much lower than in Germany and it is much easier to deliver the goods within a very short time. With this solution, however, companies should make sure that they plan their inventory well in advance in order to be cost-effective and at the same time be able to meet demand.
Cross-border e-commerce – this is what brands need to be aware of
Brand awareness is key to success
Brands that are not yet well-known in China must expect high investment costs at the beginning in order to become visible. The Chinese market is highly competitive. Brands often underestimate the fact that being known in their home market is not synonymous with brand awareness in China. Building reach through awareness is cost-intensive and realistic expectations are important. In addition to good storytelling, choosing the right communication channels and a clear investment strategy are essential to increase brand awareness and at the same time gain the trust of customers.
Collaborate with local experts
For an adequate external presentation, not only the own marketing teams are required. Instead, it’s best to work with local experts to get a deep understanding of China’s target audiences and culture. Customers in China have different needs and expectations than in Germany.
As in any other target market, it is important to establish an integral channel and content strategy and to clearly define which target group can and should be reached with which content. However, both cultures differ particularly in terms of storytelling: while in German-speaking countries we tend to reach customers through factual and informative language, symbolism and emotions play a much more important role in China. So: Simply translating the German campaign is not enough!