Are international brands prepared enough to break into China’s e-commerce market?

Damco logistics offers a key way to expand into the China market

It is well known that globally, the e-commerce B2C market is expected to grow at 17% over the current year, and it will be no surprise that the Asia-Pacific region is forecast to grow at higher than average rates, perhaps 22%.

But with international brands focused on expanding into this market, getting the delivery infrastructure right is key. At Damco, we live and breathe global logistics solutions, to make sure that whatever the consumer has ordered (be it the latest sneakers or pinstriped summer culottes), that it arrives seamlessly and on time.

As Damco sees things, foreign providers to the Chinese B2C ecommerce market have two major areas in which fundamental choices must be made: around sales channels, and around fulfilment channels. None of these choices are obvious, nor are they set in stone.

On the sales side, there is the question of how you connect with the potential customer. One option is to place product on one or more of the most popular Chinese web markets, TMall (the general market leader), Jingdong (especially consumer electronics), Alibaba, and there are other sites some of which are subsidiaries of these. These are trusted and native marketplaces, and set-up is easy for overseas brands.

Some international B2C players, such as Amazon or ASOS, have recently expanded into China, offering overseas brands with international delivery. The market share is small, but undeniably growing.

Alternatively, some US and European brands, Nike or H&M for example, have set up their own online shops in China. This can have a very positive impact on brand image, but market impact is relatively small.

The choice of fulfilment model is equally crucial.

In the direct courier model, brands hold goods overseas and when an order is received, arrange direct international courier service to the Chinese end-customer. This is easy to set up, with strong stock control and high visibility of performance, but there are high costs, long transit and thus fulfilment times, and relatively low returns. Nonetheless, this may be the right model for some businesses at a particular phase of their growth in the market.

Alternatively, brands may choose to import in bulk to one or more Chinese distribution centres, and fulfil orders from there. This means that stocks, offers and so on can be more accurately tailored to specifically Chinese (rather than say generally East Asian) preferences and business practices, and it is practicable to select courier partners to cover the entire country (including the important returns traffic). But this route does require significantly greater investment in physical facilities, labour and training, systems integration and so forth.

There are no clear-cut obvious winners here – much depends on the nature and volume of the trade, current and anticipated. Damco can support companies through any of these models, and perhaps more crucially, we have the local staff and infrastructure (3,000+ staff, 85 offices, warehouses and other facilities) to carry firms through any transitions that may be necessary as the Chinese market grows and develops.

It’s a really exciting time for international brands in China, but making sure you make the right first impression via e-commerce with consumers is crucial.

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