<Hong Kong Trader> - The role of the Internet in the Chinese mainland market is becoming increasingly defined at near two per cent of total sales, based on 2009 figures. It’s nothing like the 10 per cent estimated for super regional cyber-player South Korea, but it’s significantly higher than the meagre 0.08 per cent estimated for India.
Online shopping on the mainland is growing at a rapid pace, representing more than Rmb250 billion in sales in 2009. And it’s likely to balloon with the transformation of China’s retail business model, combined with government support for online consumerism.
Internet sales activity on the mainland may pale by comparison with the United States’ total of roughly Rmb950 billion, but mainland sales arise from a still-narrow base and with far fewer shoppers paying by credit card.
Younger mainlanders, especially unmarried, middle-class consumers aged 20 to 44, are picking up the practice of trawling for goods on the Internet.
A survey by the Hong Kong Trade Development Council reveals that over 40 per cent of respondents have an online shopping habit. The government is keen to convert that enthusiasm into retail sales of over five per cent in 2015, a leap that seems comfortably achievable, given the present take-up rate.
The greater demand for shopping and entertainment online is thanks to the proliferation of business-to-consumer (B2C) shopping websites, improved goods-delivery systems and better security for electronic payments.
There is the obvious advantage for shopper and retailer: unlike a physical store, which has limitations in its geographical reach and shop size, an online shop can display all its merchandise on the website to consumers across the country.
Tapping into the mainland’s burgeoning online sales market may well be a priority for Hong Kong retailers. Apart from operating their own websites, Hong Kong companies could consider setting up online shops on third-party websites or collaborating with mainland website distributors.
Among the list of better known mainland B2C e-commerce websites are taobao.com, eachnet.com, dangdang.com, amazon.cn and 360buy.com. These websites operate on an integrated model, just like a physical shopping centre or mall, offering a wide selection of products under different brands.
Generally, products are grouped under various categories such as garments, electronic or household products. Within these categories, they are further classified by brands.
With a diversified product portfolio, these integrated shopping websites boast a large community of online shoppers and high page-views. The major ones also have discount and bargain zones to attract Internet users.
A third-party online transaction platform is not a production enterprise itself, but a website service provider that bridges enterprises’ products with consumer demands.
Yet, to draw more suppliers, widen their product range and enhance their competitiveness, some major integrated-shopping websites also offer services such as warehousing, logistics and transport, and an electronic payment gateway.
For instance, Joyo Amazon (amazon.cn) works in partnership with its suppliers, providing payment and fulfilment services for the latter. Joyo Amazon has set up warehouses in Beijing, Suzhou and Guangzhou for the distribution and delivery of goods. Unlike the common warehousing model in the retail sector, goods are dispatched from the main warehouse to the branch warehouses, which in turn deliver them to customers.
The website’s computer system is capable of ascertaining which warehouse delivers goods at the lowest cost, and arranges for goods to be delivered directly from such a warehouse to the consumer, cutting costs and enhancing efficiency. Suppliers can send their goods to Joyo Amazon without having to deliver goods to individual customers.
The suppliers’ warehousing systems and Joyo Amazon can even be linked up, enabling the latter to keep track of the suppliers’ stock levels and adjust the inventory mix to cut down on storage expenses. Suppliers can also readily revise their production plans to meet market demand.
Unlike the more typical online transaction platforms, website distributors operate on the business-to-business-to-consumer (B2B2C) model. Sellers transact with customers through distributors.
Website distributors are characterised by their high value-added services to suppliers, including customer management, feedback and database management. Sellers just need to provide information on their products to distributors – including product photos, information on product features, pricing guidelines and repair and maintenance services.
The distributors respond to customers’ enquiries, sparing suppliers the need to hire extra manpower for that purpose. They also handle customers’ orders and notify sellers to deliver the goods. On customers’ payments, sellers can ask the distributors to collect payments for them or request customers to pay them directly.
For enterprises that are accustomed to dealing with businesses embarking on the new model of online selling, website distributors are like professional sales staffers, assisting them in effectively marketing and selling their products.
On the other hand, website distributors have to provide professional services and comprehensive information on products to attract online customers. As such, they usually specialise in a single product line, such as household appliances, portable computers or electronic dictionaries, or are engaged in the distribution of specific brand names. For instance, Zhongguancun-based ZOL (dealer.zol.com.cn) specialises in information technology products.
Most online transaction platforms use a third party to handle payments. For instance, Taobao and Eachnet use Alipay and Anfutong respectively as their payment platforms.
Customers are required to deposit cash into the accounts of Alipay and Anfutong, which will then notify the sellers to deliver the goods. Upon receipt and checking of the goods, customers will then notify Alipay and Anfutong to effect payment to the sellers.
The problem with this payment method, however, is that a certain amount of cash sits idle for given periods. The security of such funds come into question and may well turn out to be a matter for study by authorities.
Gopay.com.cn is the only state-level transaction payment platform that has a safety certification system, offering guarantees on payment security and protection of consumers and sellers.
For Hong Kong companies, there’s the option of engaging the services of China Post or third-party courier companies to deliver their goods directly to consumers. They can also use the delivery systems of large B2C websites.
For instance, dangdang.com, amazon.cn and 360buy.com have established their own logistics and delivery systems, with warehouses and delivery centres set up in places with concentrations of netizens. Goods are packed and delivered to customers in accordance with the customers’ shopping lists.
Some websites have also set up a number of goods-delivery centres at which consumers can collect the products themselves. For example, 360buy.com allows customers who have placed online orders to go to its warehouse and pay by cash, cheque or point of sales.
In view of the low-entry threshold and keen competition, it is important that online shops build the right reputation and word-of-mouth loyalty.
Since 30 per cent of mainland netizens learn about a shopping website from the Internet, online shops can pay for “recommended positions,” “keyword advertising,” “friendly links” or “promotional links” to enhance their listing on search engines to capture consumers’ attention.
Some netizens go so far as to give their comments and evaluations of goods purchased, which serve as a reference for other customers. So it is vital to build goodwill among online shoppers.
Hong Kong’s Online Niche
With accumulated years of trade experience, Hong Kong companies offer items with guaranteed quality and design, which are generally welcomed by mainland consumers.
Yet, companies can further adapt to address mainland consumers’ specific needs. Competing against a wide array of product choices and bearing in mind mainland consumers’ attention to the performance-price ratio, Hong Kong firms have to enhance their niche services by launching new products regularly and offering items in a wide selection of designs, sizes and colours – at competitive prices.
Online transactions are set to be a major growth driver in China’s consumer market and a novel channel for Hong Kong companies to engage in domestic sales. Various types of third-party platforms allow SMEs to enter the market at a low threshold, at low cost and by adopting simple procedures: a simple click for sales and profits.
Here are some of our Mavista online shop references:
|Chromaz Online Printing||Home Convenience Online Supermarket||The Buttercup Shop Personalized Gift Shop||Mavista LifeStyle Demo eShop|