Big challenges aren’t preventing U.S. companies from staking a claim in China, now the world’s largest national e-commerce market, according to the newly published China 500. They’re diving into a market that is exploding, but that’s also very different from online retailing in the U.S.
Mark Brohan , Research Director
China’s e-commerce market is big, fragmented and dominated by a single marketplace operator that accounts for about 80% of all online retailing transactions. But none of that is preventing U.S. companies from staking a claim in China, which some analysts believe will soon be the world’s largest national e-commerce market.
In fact many U.S. retail companies and consumer brand manufacturers are beginning to attract customers and generate sales, on their own e-commerce sites or on China’s big online shopping malls, or both, according to data published in Internet Retailer's 2014 China 500. In fact the data on U.S. web merchants selling online in China reveals that it isn’t only the biggest names in U.S. retailing building a base in China, such as Amazon.com (No. 4 in the China 500) and Apple (No. 12). Other U.S. companies such as Coach, No. 488 in the China 500, also are beginning to sell successfully online in China.
Overall the 30 U.S. companies ranked in the China 500 grew their combined web sales in China 36.7% to $5.64 billion in 2013. That total accounted for about 7.7% of all combined China 500 sales of $73.58 billion.
The biggest U.S. merchant ranked in the China 500 was Amazon.com, which grew its Chinese web sales 38% to an Internet Retailer-estimated $3.0 billion in 2013. The fastest-growing web merchant among U.S. China 500 companies was online computer and consumer electronics retailer Newegg Inc., which grew its sales in China in 2013 by 66% to an Internet Retailer-estimated $664 million. Newegg has been selling online in China since building a base in 2003.
Despite such growth, retailers from the U.S. and elsewhere are finding that China is a complicated market, but one that is big and getting bigger. The number of online shoppers in China has grown by 125% from 108 million Internet users who made at least one online purchase over 12 months in 2011 to 242 million in 2012, says the China Internet Network Information Center, a government-sanctioned research organization. That helped fuel 42% growth in China’s e-retail sales in 2013 to $305.74 billion, from $215.31 billion in the prior year, Beijing Internet research firm iResearch estimates.
China also is an e-commerce market where Alibaba Group and its two big web shopping portals—Taobao and Tmall—account for about 80% of online retail purchases. Other challenges include competing against established Chinese retailers, big and small, many of which are fiercely competing on price as they seek to grab market share amid the rapid growth in online retailing in China.
But U.S. companies such as Coach, which grew its Chinese web sales 11% to an Internet Retailer-estimated $4 million in 2013, are building a base by using social media and other custom marketing programs to build awareness of Coach’s brand among the growing number of well-heeled Chinese shoppers craving the quality offered by Western brands.
Coach, which makes and markets a famous line of handbags and related items, is building an e-commerce base by using Chinese social media outlets, such as the Twitter-like Sina Weibo, and drawing on well-known celebrities such as actress Gwyneth Paltrow and Chinese-American singer Leehom Wang to promote the Coach brand to Chinese consumers. “Leehom Wang was a great partnership for us,” says Coach executive vice president of global digital David Duplantis. “Seeing a local Chinese celebrity created greater traction.”
To grow e-commerce Coach first began selling online on Tmall to learn the web shopping habits of Chinese consumers. After a one-month test, Coach withdrew from Tmall to sell on its own e-commerce site in China, Coach.com.cn., which it promotes as the only authorized online outlet for authentic Coach goods in China.
Now the company is building on its network of stores in China and appealing to web shoppers in the biggest Chinese cities to drive more web traffic to its e-commerce site. “Much like in the U.S., the urban areas like Shanghai and Beijing are our top markets for e-commerce, but we are seeing a reach far beyond the markets where we have stores,” Duplantis says. “Generally, consumers heard about the brand through digital impressions or through traveling to the major cities.”
Going forward Coach will be using even more specialized social media to attract shoppers to its brand, he says. “We feel by establishing our own presence through digital media, the consumer is best served by landing them on the authorized Coach site that’s the only authorized seller of Coach products online in China,” Duplantis.
For other U.S. China 500 merchants to key to selling successfully online in China is to commit to a long-term strategy and to remain flexible. “There’s still plenty of room for carving out a niche and many retailers are still in the process of testing the water, to see if their strategies are feasible,” says Fung Business Intelligence senior research analyst Christy Li.
Coach, Amazon, Apple and Newegg are among the U.S.-based merchants ranked in the 320-page China 500, a newly published digital edition research guide and database from Internet Retailer. The China 500 ranks, by online sales, the 500 largest retailers in China, which in the next year will likely according to some analysts eclipse the U.S. last year as the largest national e-commerce market. More on how to order the China 500 is available here.