There is undoubtedly a lot of hype around the Mainland China ecommerce market. While the market is open to foreign sellers, there are few success stories to be found.
In this Q&A with Michael Michelini, founder of GlobalfromAsia.com and the Cross Border Summit in Shenzhen, you will learn if you’re products are a good fit for the Mainland China market.
In addition, you will also learn how you can use a Hong Kong company as part of your supply chain, and much more.
Michael, please introduce yourself and the upcoming Cross Border Summit
Hi, my name is Michael Michelini and I’m the founder and host of Global From Asia – a cross-border business podcast and blog for ecommerce executives.
Cross Border Summit is our annual conference every April to bring together top leaders and experts to discuss cross-border e-commerce, both importing into China (via Wechat marketing and logistics) as well as exporting from China (via Amazon FBA and other means). Our third annual summit is a full 2 day conference on April 20-21, 2018 in Shenzhen China.
Say that I am a semi-established ecommerce entrepreneur in the US or Europe. Why should I care about China?
China is getting harder and harder to ignore. Both for importing and selling into China as well as exporting globally – the Chinese business owner is covering more and more of the market.
Many of our network overseas has been studying closely Chinese sellers on Amazon and learning from them now!
On the consumer side, for importing and selling into China, the middle class market has continued to grow and the hunger for imported (foreign) goods is better than ever.
It depends on your product line and the strength of your brand. If you are able to build a brand that the Chinese consumer trusts, you can command a healthy profit margin and repeat buyers.
Just like anything in life, if you are willing to invest for the long term, the Chinese market can pay big dividends on the long term.
You’ve been organizing the Cross Border Summit for a few years now. What kind of businesses are interested in selling into China?
At Cross Border Summit, as well as the blog and podcast at Global From Asia, we have connected with business owners of all shapes and sizes.
For those looking to expand and sell into China, those who are most successful have an established brand in the international market already.
Ones that are doing well on platforms such as Amazon FBA are able to leverage this success and social proof to sell to the Chinese market.
Many of our FBA sellers in the network prefer to not disclose their names, so I will speak broadly. A sports sunglasses brand saw organic demand for its products coming from China.
Their customer service department was noticing emails coming from China who were trying to buy their goods on the shopping cart but having payment issues and other checkout problems.
Discussing with us and attending various events, they have localized their shopping experience in China and have shown the connection of their overseas [online] shop with their Chinese [online] shop to differentiate and grow.
Therefore, those that attend our events and succeed in entering the Chinese market have been ones who already have some traction and brand with their product line overseas.
While the e-commerce tools and platforms in China are different, the underlying method of selling online is essentially the same. It comes down to having a quality product with an established brand.
For the event, Cross Border Summit, we are seeing many experienced Amazon FBA sellers from the overseas market investing in growing in the Chinese market.
This is a great position to take, as you can show the Chinese consumer your track record in the international market and leverage all this equity to pull in the China market.
So to answer your question, our attendees are more experienced sellers with brands that have the formula for success when growing into the China market. We see them having some presence in China for logistics and customer service, with their brand headquarters outside of China (as they still have their international distribution going).
What kind of ‘cross border product categories’ are popular in China?
The key to differentiating in the Chinese market as a Western brand is leverage health, safety, and trust. Which comes down to branding at the end of the day. Due to horrible scandals in the past like tainted baby milk powder in China – the Chinese consumer doesn’t trust their own domestic brands as much as those overseas.
A huge success is iHerb. They are a one stop shop for all your health goods, and have been leveraging cross-border e-commerce and their brand of trust and safety to dominate the Chinese ecommerce market. Free shipping, fast and secure – many Chinese use this as their go-to source for health supplements and supplies.
This is how foreign brands can crack the mark. Of course if you have an established brand of baby milk powder from overseas, you must be getting plenty of Chinese consumers knocking on your door.
This goes for any type of consumable – for babies especially, but even for the general Chinese consumer.
Beauty and fashion is another massive market in China. Western movies and culture influence has created demand of Chinese to look and feel like a Western person – and they buy the products to help them get this image and “feel”.
And lastly, anything in the education market. Chinese are lifelong learners, and will do what it takes to soak up as much knowledge.
From preschool to post graduate certificates, English learning, its all in huge demand. If you can get a physical good that is involved in educating to fit the Chinese market, you have a solid future ahead.
Have you seen any trends or changes in terms of products that are popular in China?
Can’t say I see any monumental shifts in the Chinese trends, as far as imports or foreign goods. Still really boils down to the trust factor.
What I have seen is more developments in the logistics, services in the cross-border ecommerce into China world are helping a lot to “prove” the goods really are from overseas. This is due to domestic sellers claiming it is imported but really just re-labeling it to trick the buyer.
Which ecommerce channels are right for businesses that want to test a product in Mainland China?
The ecommerce war in China is between Alibaba (owner of Tmall.com) and Tencent (owner of Wechat and investor in JD.com). So you need to decide what product you are selling is right for which market.
If you need to have social media to help push it, then Wechat would be the place to go.
If you have a product that is discovered by people going to a marketplace and searching, Tmall.com is a better place.
But don’t expect it to come organically – you will need to invest in paid ads or marketing campaigns on either of these to get traction.
One would decide between JD.com and Tmall.com based on their marketing strategy. If you are planning to do more social media marketing to sell your product, and that would involved Wechat marketing, then JD is your go to.
If you prefer to market your products directly on a marketplace where people are searching for goods – Tmall would be my recommendation.
Do you suggest that they ship products from the US or Europe, or from a fulfilment centre in Hong Kong?
Again it depends on the market you are looking at. If light weight and higher value – combined with a low “Trust” of domestic products in the category, then shipping direct from US or Europe is a good option.
But if its more price sensitive, heavier, or shipping time is a bigger factor, leveraging Hong Kong or Chinese free trade zones is a good option.
Even importing and storing inside Mainland China is right.
Still, Hong Kong is the best gateway to doing business into China. But you most likely will need to take that final leap into Mainland if you really want to grow and scale.
Are there any benefits to incorporating a Hong Kong company, if I want to sell online in the Mainland?
Many love the flexibility of having a Hong Kong company. We have had business trips in Hong Kong specifically for the purpose of showing you how to leverage the power of a HK company for your China business.
But a HK company is still a foreign company as far as Mainland China business goes. You can open a JD worldwide account, list in their marketplace.
Doing so, they will collect the funds and then deposit to your account in Hong Kong. So it is feasible, also with Tmall and other marketplaces in China. Ä
The challenge comes when you want to do Wechat marketing with an official account – which technically requires you to have a Mainland Chinese company (to directly own the account).
Many use Hong Kong as the holding company in their [Mainland] China business structure.
This means the Hong Kong company fully owns the Chinese subsidiary- making the individual owners at the HK level. This makes company share transfer and other admin tasks smoother.
Thank you Michael. How can our readers find out more about the Cross Border Summit?
Write about the summit and add a link to the website here!
My pleasure! Many of the answers to the China imports and sales is best found by researching your own vertical and customizing the answers above.
Or, of course, attending an event like Cross border Summit! Save the date April 20-21, 2018 with discounts and incentives to lock in your ticket early.
Head on over to www.globalfromasia.com/crossbordersummit2018 now for the full speaker list and details.