TOP E-commerce Platforms in China in 2023 – HI-COM
Chinese E-commerce platforms keep booming in China. It probably comes as no surprise that e-commerce has been hugely affected by the global pandemic. Many experts agree that consumer behaviour has changed significantly from 2020 as a result of Covid-19. However, in 2023 it is clear that e-consumers have adapted to the current global situation, and numbers in China have grown by an additional 17%.
Thanks to social networks, e-commerce has been able to develop more and more, by making promotion, communication and online purchasing easier. In addition to this, Chinese apps such as WeChat, have now made it possible for consumers to buy products directly.
What platforms are there, and how do you choose the right one for your brand? Let’s analyze the e-commerce ecosystem of China and find out!
E-commerce is a Growing Sector in China in 2023
E-commerce is a booming sector that offers a completely different customer experience to any physical store. Online consumer behaviour has drastically changed in 2021 due to the explosion of social media and travel restrictions.
According to GlobalData’s E-Commerce Analytics, e-commerce sales in China are expected to register a robust growth of 17.2% in 2023, as a result of the travel restrictions.
The e-commerce market has developed, creating even more advanced features and offering faster online exchanges to enrich customer experience.
The very minimum requirements for brands to be able to stay afloat on the e-commerce space, as well as on social media platforms are still the same: flawless content, trusted e-commerce partners or experienced employees, and a strong marketing strategy.
How Coronavirus Has Changed E-commerce Consumption Habits in China?
Online consumers have changed their e-commerce consumption habits as a result of the COVID-19 pandemic. This particular situation makes online communication on social networks more complicated than usual. In 2020 brands felt too uncomfortable and assumed that people might not pay attention during this time. Therefore, they decreased activity on social networks.
According to research conducted by Mckinsey, 85% of consumers said that they spent more time per day in front of a screen during the pandemic, whilst 84%, took the opportunity to try out new programs and services during isolation and quarantine.
Consumers and businesses in China have accelerated their use of digital technologies as a result of COVID-19. Based on mobile surveys of Chinese consumers conducted by Mckinsey, about 55% are likely to continue buying more groceries online after the peak of the crisis.
As an outsider, entering the Chinese market may seem intimidating and overwhelming due to its rich eco-system of platforms and apps. In this article, we will discuss how to choose the best E-commerce channel for your brand in China.
Every company hopes to be successful which often encourages brands to use only the biggest and most popular platforms to do so.
Furthermore, popular Chinese platforms can sometimes be ineffective as they often require a lot of investment for traffic and marketing, yet, not every company is willing to spend hundreds of dollars when entering the Chinese market.
The World of E-commerce in China: How Does It Work for Foreign Brands?
General trade and cross-border e-commerce platforms
The Chinese e-commerce ecosystem is very developed no matter what type of trade foreign brands wish to be involved in. But before we go into the technical aspects of each, let’s get familiar with the terminology:
General trade e-commerce refers to the unilateral import or export trade of enterprises with import and export rights in China. It involves goods imported and exported according to the general trade transaction mode and are general trade goods.
Cross border e-commerce refers to an international business activity with transaction subjects belonging to different customs areas within Special Economic zones, where purchase orders, payment, delivery, and other transactions are completed through cross-border ecommerce and logistic channels.
One other detail worth mentioning about this transaction model, is that there are no import taxes applicable, as the goods are “floating” in the international space, and are delivered from companies abroad directly to the customer’s home, thus eliminating the involvement of importers and resellers.
Does this mean that all businesses shall go “cross border”? No. The cross border model will be 100% dependent on whether or not your brand store is strong enough in bringing in traffic to it. And this is another large expense, as platforms that provide this service know very well that brands fully depend on them.
How Much Does It Cost to Sell Products on Leading E-commerce Platforms in China?
Different E-commerce platforms in China require different levels of investment. Some Chinese E-commerce platforms take a commission from the sales you make and also charge for platform usage fees, template fees, marketing tool fees and deposits.
Tmall
When opening a flagship store on Tmall, it requires an average investment of 30,000 USD (dependent on the type of commodity, as it can vary from 20,000 to 100,000 USD).
Minimum monthly sales volume of the store:
One million RMB +
Marketing Costs
To try and reach one million US dollars in sales per year, it is likely that you will need to spend at least $10,000 USD each month on marketing. This means roughly 12% of your gross income will go into advertising.
Agent (TP) fees:
10-20%
JingDong
Managing a business on JingDong (JD.com), can be as expensive as Tmall, or even more.
Enterprises will have a commission of 4-6%. Local businesses will be expected to pay 1,000 RMB /150 USD as a monthly platform usage fee, whereas foreign enterprises will be paying 1,000 USD per month.
However, the store design template is free.
Lower safety deposit
JD also has a lower safety deposit (10,000 – 100,000 RMB depending on the industry, and 100,000 RMB applies for high-risk products such as cars, electric bikes, etc.)
Pingduoduo
This platform is probably the most cost-efficient as no commission is collected from retailers for using the platform.
Safety deposit
Safety deposits are also very low, with a maximum payment of 10,000 RMB/1,500 USD.
It is free to enroll and the advertising on the platform is still reasonable (CMP is the cheapest of all of the platforms above).
Red/Xiaohongshu
It will cost 300 RMB annually to use this platform.
The safety deposit is around 20,000 RMB/3,000 USD.
In order to use advertising on RED, another 20,000 RMB shall be charged to the ads account.
Some other options to sell your products online
Taobao
It will cost 300 RMB annually to use this platform.
The safety deposit is around 10,000 RMB/1,400 USD.
You will also need to purchase yearly design template package that could vary from 20-100 USD per year.
Kaola
Coming in second, after Xiaohongshu by Monthly Active users (7,6M), this platform is female oriented (>80%), with a market share of more than 27.1% in year 2020. Owned by NetEase and backed by Alibaba, this platform brings tons of traffic to the brands listed on it.
It will cost 6000 RMB annually to use this platform.
The safety deposit is 15,000 USD.
- Commission: 2-10%, based on product category
VIP.com
Competitor of Koala, backed by Tencent and JD.com, this platform is targeting the generations that are born in the 1980s and the 1990s.
Some commissions and payments might be applicable depending on the product category.
Douyin Market
Some commissions and payments might be applicable depending on the product category.
Mogu Jie
Some commissions and payments might be applicable depending on the product category.
Different types of Chinese E-commerce Platforms
The Chinese market has developed lots of successful E-commerce platforms, all of which cater to the needs of the consumers and products.
Most brands tend to approach one of China’s most popular platforms, Tmall. Tmall is an Integration of the Taobao app. However recently, brands are reporting more and more that their sales are decreasing dramatically on Tmall. Those who set up their store on this platform without fully researching if there is a demand for their product will struggle.
In 2018, Kantar Media released a whitepaper to show which businesses best suit the different types of E-commerce platforms:
Who Is Shopping on E-commerce Platforms in China?
The Platform’s audience is often a deciding factor for brands to join a certain marketplace. The percentage of female shoppers, age, education, income and time spent on specific platform will play a crucial role for brands.
Platform size: The platform’s audience size matters. However, it is also essential to bear growing trends in mind. For example, four years after its creation, Pingduoduo became larger than JD (Jingdong) based on its registered and active users.
Tier-one cities: For luxury businesses, it is necessary to aim for the wealthier cities in China. Whereas other businesses might instead target second or third-tier cities dependent on their products. However, the brands that target top tier cities may find their competition to be much more ambitious.
Some platforms that focus on tier-one cities: RED, Tmall, Jingdong, VIP.com, Koala.
But don’t forget that in order to get any traffic on these platforms, you will need to pay great attention to store and product optimization, marketing activities and advertising. This is another budget to be used upfront.
Should I Localize My E-commerce Website into Chinese?
Many brands started their market entry via localizing their e-commerce websites in China.
In fact, Nespresso, Ikea, and most luxury brands took that road. But as it turned out, Chinese customers are very suspicious when it comes to purchasing products on official websites (excluding luxury brands), especially when it comes to payment processes and returns. The two ecommerce giants Tmall and JD had popularized their payment experiences (almost seamless), delivery times, and 7-day product returns, making this almost a “national e-commerce standard” that now Chinese customers are expecting either the same exact conditions or better ones (if at all possible).
This has led to the majority of the Chinese population developing an e-commerce habit. Jack Ma called it “e-commerce lifestyle”. Not only people would go to e-commerce apps to search for products to buy, they would also just window shop, look for entertainment, and even play games. Seeing these and other reasons, Nespresso and Ikea both had to create Tmall flagship stores, as this channel is not only the gate opener to the largest online traffic pool, but is also a way to improve their brand recognition and brand engagement.
It doesn’t mean that brands shouldn’t have any type website.
All established brands have official websites that showcase their brand story, their positioning, as well as the latest products or services they provide. When it comes to lesser-known brands entering the Chinese market, potential customers do their due diligence search and check what other people, bloggers, magazines are saying about this brand. Thus, it is necessary to work on your brand’s e-reputation, and this can be done before the products reach the shelves in China.
What about Starting with Smaller E-commerce Platforms in China?
When it comes to choosing the platform to start with, one should keep in mind the variety of business model platforms to work with.
Other than traditional/general e-commerce channels such as Taobao, Tmall, JD, there are platforms that work with the “group buy” model (Pingduoduo), word-of-mouth model (RED), flash sales (vip.com), cross the border (Koala, VIP.com), social sales (doujin market, RED).
Not to mention that foreign brands popular with Chinese customers are being sold via Daigou (personal shoppers abroad) through second hand apps, such as Xianyu and Zhuanzhuan.
These Chinese e-commerce platforms can be a great fit for your brand if:
- You brand is targeting GenZ or Millenials
- Your brand is already known in China via PR or E-repputation
- Your brand is coming from the most popular destinations, according to the product category (Scandinavian countries for mother and child, France/UK for cosmetics and perfumes, Western Europe or Oceania for food and beverage etc.)
How to Choose the Right E-commerce Platform for Your Brand?
Not sure how to choose the perfect e-commerce platform for your brand? Start with these steps!
- Market research. This is perhaps the most important task of all. Seeing what market share your brand can take in the Chinese market, and learning who your direct and indirect competitors are.
- Investment allocation. Big Chinese ecommerce platforms are not for every brand. Brands need to be smart about how to use their resources in such a complicated market as China. Will smaller brands bring as many business opportunities? How can your brand outrun the existing competition? When is the right time to launch your brand in China? All these and lots of other questions must be answered when your brand does the due diligence research.
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Branding and brand localization. Once you have made the call, you need to prepare your brand for the Chinese market. How will the customers pronounce your brand name? Would this name be available for trade mark registration? Where can the customers find information about you? Perhaps you have seen the examples of some lesser known Chinese brands selling their product on Amazon, that use auto translation for their product description. Make sure this doesn’t happen to you in China! Localization of foreign brands done by professionals is crucial for the successfully entering the Chinese market.
What Type of Store/account Can You Register on Chinese E-commerce Platforms?
When entering China’s E-commerce space, both the platform’s business model and your brand’s business model should be “on the same page”. Here are some models to choose from:
- Regular Local Enterprise: registering on a platform as one of the local businesses (even fully foreign-owned corporations), requires a Chinese business license.
- Regular Overseas Enterprise: registering on a platform as an overseas business that wants to use a cross border channel, to be a platform supplier, or have an overseas brand marketing station (for marketing only, not for sales), also requires a foreign business license and foreign bank information.
- Flagship store: available for Local and Overseas Enterprises on various platforms. Flagship means “branded” and requires a trademark.
- Supplier of the platform: Is not an actual account, but more of a supplier contract. Suppliers provide products that are sold on Tmall, JD mall, Tmall’s membership store, Alibaba’s Hema and many other markets. They also require a manufacturing and hygiene license.
- Personal store: a personally owned store where anything can be sold, usually a small business/DYI type of store. This requires a Local ID.
- Exclusive Distributor: similar to a local enterprise, an exclusive distributor is a representative of one or two brands that have an exclusive distributorship right with those brands. For Tmall it would be a TP (Tmall partner) and would require a brand’s letter of authorization.
- Brand station: In RED/Xiaohongshu. The brand station is a brand account that is used for communication and marketing.
Brands have multiple options to choose from with regards to Chinese E-commerce platforms. These can vary from working abroad, to working with local partners or hiring a local team.
According to a platform’s business model, brands will need to structure their marketing and sales operations accordingly. On PingDuoDuo with group buy priority, brands will need to consider a special price structure for different group sizes. On Xiaohongshu, a review and advice platform brand should work closely with content creators in order to generate traffic and sales. JingDong requires strong marketing on its platform, as well as knowledge on PPC type of advertising.
It is important to understand local shopping and product searching habits. It is also important to remember the specifics of each E-commerce platform and the top priorities for your brand planning to operate on local social E-commerce or media. Localizing your brand’s message or even brand name is also critical for the brand’s success.
Want to learn about best marketing strategies? Check our guide out!
How can HI-COM’s help your brand to enter China’s E-commerce
Consider starting with these actions in order to be able to sell your brand in China.
- Market study: a comprehensive study of product/brand deficits in China. Study of competitors. Gathering data about industry-specific local shopping habits and tastes. Evaluation of pricing strategy of competitors.
- E-reputation: creating a digital footprint on various Chinese wiki sites, blogs, and magazines, in order to create trust from Chinese consumers.
- Brand localization: lite version. Localizing a “lite” version of a brand’s website, and hosting in China. Localizing brand name, brand attributes, marketing collaterals.
- Brand awareness social media campaigns: the creation of social media campaigns that highlight the brand’s differentiating factors, educate the local audience about the usage of the product/service, evaluating results. Social media listening.
- Creating social media channels: choosing one or two of the most efficient social media accounts, creating a 6-month publishing plan.
- Using KOL for brand awareness and lead generation.
This is the first 6-9 months of a brand’s market entering plan, which might need some extra input depending on the industry.
If you have any more questions about Chinese E-commerce platforms and how to enter the Chinese market with minimum costs, feel free to get in touch as we’d be delighted to hear from you.
