- Forrester Councils
- Councils Overview
- log in
Posted by Zia Daniell Wigder on September 28, 2011
Last week I joined a few of my colleagues in China to meet with a variety of eBusinesses in both Beijing and Shanghai. We met with online retailers, technology companies, and other players in industry. For those used to selling online in countries other than China, some of the takeaways included:
Multichannel remains in its infancy. With the leading online retailers in China being pureplays, multichannel remains at very early stages. In-store pickup or returns are not widespread – however, there are emerging multichannel initiatives. In a recent, high-profile online-to-offline expansion, for example, Taobao opened a new furniture showroom in Beijing to enable consumers to experience different furniture brands sold on the site. The furniture sellers rent out space in the showroom to display their products. We had an opportunity to visit the huge showroom, which was somewhat quiet when we were there – terminals stationed throughout the showroom (see below) enabled consumers to insert a card and select products online, then proceed to checkout to pay.
Retailers’ localization extends well beyond language. In addition to employing standard localization tactics like translating site content, using local images, and integrating local payment types such as bank transfers or China UnionPay, global online retailers localizing for China now often include options like delivery by courier, chat functionality, and COD (whereby consumers can pay up to several thousand dollars in cash directly to the person delivering the package). Once the domain of domestic Chinese retailers, these functionalities are now being embraced by global players in the Chinese market.
Delivery times – and quality – still vary quite a lot. Delivery times and service levels are still reported to vary greatly between retailers and between sellers on sites such as Taobao. Companies like FedEx are positioning themselves as reliable alternatives to courier-based services and have started to work with some companies such as luxury brands to ensure that their deliveries arrive on time and that their customers receive higher levels of service than is typical.
Consumers continue to order small-ticket items online. While clothing and consumer electronics are popular online purchases in China, consumers do not hesitate to take advantage of low shipping costs to order less pricey items. Last year The Economist stated that Unilever’s top selling product on Taobao was Lipton Tea; parent company Alibaba reports that 53 packs of diapers were sold every minute on the site in 2010. One person I spoke with in Beijing said that when her colleagues need small grocery items, the first place they turn is Taobao, where grocery purchases over 100RMB (approximately $15) ship for free and there is guaranteed 24-hour delivery.
eBusinesses view smaller cities as key to their success. In almost every conversation, it comes up that future growth for eBusinesses will not come from the tier 1 cities like Beijing, Shanghai, and Guangzhou, but rather from smaller cities throughout the country. Indeed, in Alibaba’s report on 2010 Taobao sales, the company stated that “While coastal regions continued to have the highest GMV totals, provinces in the central and western regions saw the biggest year-on-year GMV growth in 2010.” GMV in these central regions is clearly a magnitude below that of the large coastal urban areas; however, some brands are banking on the fact that the online channel will help them sell to consumers in regions that will not be served by the same breadth of retailers or where retail stores typically carry a smaller selection of brands.