{"id":1353,"date":"2017-02-16T00:00:00","date_gmt":"2017-02-16T00:00:00","guid":{"rendered":"https:\/\/www.motionpoint.com\/?post_type=blog&p=1353"},"modified":"2017-02-16T00:00:00","modified_gmt":"2017-02-16T00:00:00","slug":"breaking-into-china-seizing-opportunities-and-mitigating-risks-part-1","status":"publish","type":"blog","link":"https:\/\/www.motionpoint.com\/blog\/breaking-into-china-seizing-opportunities-and-mitigating-risks-part-1\/","title":{"rendered":"Breaking Into China: Seizing Opportunities and Mitigating Risks (Part 1)"},"template":"","blog_categories":[5,9],"resource_categories":[28,37,30,24,35,33,26,21,23,22,17,18],"targeted_localized_audience":[],"document_categories":[],"class_list":["post-1353","blog","type-blog","status-publish","hentry","blog_categories-international-business-strategies","blog_categories-marketing-strategies","resource_categories-industry-b2c-manufacturing","resource_categories-content-type-blog-post","resource_categories-business-goal","resource_categories-role-business-strategist","resource_categories-content-type","resource_categories-business-goal-global-expansion","resource_categories-industry","resource_categories-topic-international-marketing","resource_categories-role-marketer","resource_categories-role","resource_categories-topic","resource_categories-topic-website-translation"],"acf":{"blog_short_description":"As middle-class prosperity and Internet penetration continues to soar, China thrives as an expansion-worthy market.","news_inline_styles":"","blog_video_id":"","article_body":"

Editor\u2019s Note:<\/b> This is Part 1 in a 2-part series. Read Part 2 here.<\/a><\/i><\/p>\n

China\u2019s yearly economic growth may not be as supercharged as it used to be, since it began its pivot from a manufacturing-based economy to a consumption-based one, like the United States\u2019.<\/p>\n

But amazingly, that hasn\u2019t impaired the buying power of its middle class, or their consumer spending, or e-commerce growth. The market burns bright with promise for both domestic and foreign businesses\u2014especially online.<\/p>\n

Indeed, China\u2019s retail sales grew more than expected last November<\/a>, as did GDP in Q4. The country remains on track to hit its goal of doubling GDP and per capita income from 2010 levels by 2020, analysts say<\/a>. That\u2019s good news for China, and for Western businesses hungry to serve its residents.<\/p>\n

\n

The time is ripe for businesses to enter the Chinese online market.<\/p>\n<\/blockquote>\n

We\u2019ve been saying this more and more<\/a> in recent years, but the time is ripe for businesses to enter the Chinese online market. We are now witnessing a \u201cperfect storm\u201d convergence of technological, social and economic trends<\/b> that are priming Chinese consumers to research and buy online more than ever before \u2026 and to buy from cross-border websites in particular.<\/p>\n

There are challenges to entering and serving this market (which we\u2019ll discuss in Part 2 of this blog series), but the opportunities have simply become too compelling to ignore. Let\u2019s take a closer look at this perfect storm.<\/p>\n

The Opportunity Remains Bright<\/h2>\n

Western companies are fast learning that they need not have brick-and-mortar presences in China to serve Chinese customers. Websites and virtual marketplaces such as Tmall are very powerful channels to market to, and sell to, these increasingly affluent consumers. In China\u2014as with the rest of the world\u2014online is fast becoming where the action is.<\/p>\n

Internet penetration here continues to grow. It\u2019s presently up to around 53%<\/a>, representing over 730 million people. This rising Internet use\u2014alongside rapid growth among the country\u2019s middle class<\/a>\u2014is translating into supercharged online spending. E-commerce spending grew by over 70% in 2015 alone.<\/p>\n

This growth is especially apparent on cross-border e-commerce sites<\/b>, which bodes well for Western brands and retailers. Last year, more than 15% of the country\u2019s population made cross-border purchases (worth more than $85 billion). eMarketer estimates<\/a> that in four years, 25% of China\u2019s population will be shopping on cross-border sites. This will represent over half of the country\u2019s online shoppers.<\/p>\n

\n

Western companies need not have brick-and-mortar presences in China to serve Chinese customers.<\/p>\n<\/blockquote>\n

Many of these cross-border shoppers are young, and highly educated, an Amazon study<\/a> recently found. About 80% of consumers surveyed were younger than 35. Ninety percent had bachelor\u2019s degrees.<\/p>\n

Emerging Demographics<\/h2>\n<\/p>\n

Historically, Internet adoption has grown most quickly in China\u2019s urban regions. However, expect future growth to hail from rural areas<\/a>. Government agencies are currently doubling down on rural infrastructure improvements to help generate consumption in these areas. And it\u2019s working: rural e-commerce almost doubled to $51 billion in 2015, according to the country\u2019s Ministry of Commerce. Here\u2019s another way to illustrate the astonishing rural growth. Between 2015 and 2018, China\u2019s \u201ctier 1 cities\u201d (such as Beijing) will see a total increase of 10.6 million new Internet users. The rest of the country will bring nearly 150 million<\/i> new Internet users during that same time, JP Morgan data suggests.<\/p>\n

Beyond the emerging rural opportunity lies the astonishing power of Chinese millennials. Perhaps unsurprisingly, these young, tech-savvy consumers are a driving force in China\u2019s e-commerce space. There are over 415 million of them, accounting for nearly one-third of the Chinese population. (Amazingly, they represent more people than the working populations of the U.S. and Western Europe combined,<\/i> says Goldman Sachs<\/a>.) <\/p>\n

They\u2019re already active shoppers online. Of all Chinese retail e-commerce shoppers, 39% are between the ages of 18 and 25<\/a>, who largely fall into the post-1980s jiulinghou<\/i> generation. Another 32% are from the between the ages of 26 and 35, members of the post-1990s balinghou<\/i> generation. All told, millennials represent over 70% of the country\u2019s online shoppers.<\/p>\n

Thanks to high-speed Internet and mobile access, these consumers embrace zhai,<\/i> or \u201chomebody\u201d culture<\/a>. This means millennials spend most of their leisure time at home, and often prefer products delivered to them, ordered via digital channels.<\/p>\n

According to a Forbes<\/i> contributor<\/a>, Chinese millennials aren\u2019t burdened by student loans or housing expenses. (About 90% of Chinese households own their homes, purchased with cash. Mortgage payments are uncommon.) The end result? Chinese millennials are big spenders. That\u2019s good news for e-retailers. According to that Goldman Sachs report, Chinese millennials will see their income grow by $3 trillion in the next decade.<\/p>\n

\n

Chinese millennials are big spenders and they represent over 70% of the country\u2019s online shoppers.<\/p>\n<\/blockquote>\n

Another interesting emerging e-commerce demographic within China are elderly consumers. According to a 2016 survey<\/a> of 1,500 consumers, about 80% over the age of 55 said they like to shop online. Nearly all of those consumers had shopped online in the past year; over 60% said they\u2019d made online purchases more than 10 times that year.<\/p>\n

A Mobile-First Market<\/h2>\n

Serving Chinese consumers with an in-market\u2014or cross-border\u2014e-commerce experience can be a smart play for your business. But don\u2019t ignore mobile\u2019s powerful role in how the Chinese consume content and shop. According to the China Internet Network Information Center, over 95%<\/a> of the country\u2019s Internet users accessed the web last year via mobile devices. <\/p>\n

Last year, mobile e-commerce (m-commerce) represented over 55%<\/a> of all retail e-commerce sales in the market, totaling more than $505 billion<\/a>. This spending will hit $737 billion by year\u2019s end. By 2019, it will be a $1.4 trillion market, representing nearly one-fourth of all Chinese retail spending\u2014both online and off.<\/p>\n

The m-commerce space is \u201cmiles ahead<\/a>\u201d of the U.S. say some pundits, thanks mostly to the mobile-first nature of the market. China is the world\u2019s No. 1 smartphone market. Nearly 100% of Chinese residents between 14 and 47 now own a smartphone Deloitte data suggests<\/a>. Half of these consumers access the Internet about 25 times a day via their phones. Ten percent access the mobile web more than 100 times a day.<\/p>\n

\n

Over 95% of the country\u2019s Internet users accessed the web last year via mobile devices.<\/p>\n<\/blockquote>\n

Why is m-commerce so stratospherically popular here? Most Chinese residents never formed a habit of shopping online via PCs, and have effectively leap-frogged the traditional e-commerce experience. Apps and the mobile web are how these consumers experience online content and shopping.<\/p>\n

Mobile payment platforms also make the buying process frictionless for consumers. Take Chinese social network WeChat, which has nearly 820 million active monthly users\u2014640 million of whom<\/a> access the service through their smartphones. This service facilitates tons of transactions (thanks to the ability for retailers to offer transactional experiences within WeChat), processed through its WeChat Pay platform. <\/p>\n

\u201cWeChat is the most influential app in the world,\u201d an analyst told CNBC last year<\/a>. \u201cIt has the functionality of an iTunes store. So you can do anything you want.\u201d<\/p>\n

To Be Continued\u2026<\/h2>\n

It should be clear that the opportunities for e-commerce and online engagement are thriving in China. These consumers are crazy for the Internet, and are already spending plenty of time and money there.<\/p>\n

In Part 2 of this blog series, which will debut next week, we\u2019ll explore how to best serve these customers. You\u2019ll discover e-commerce best practices, read about peculiar bureaucratic pitfalls (and how to sidestep them), and gain a better understanding of local marketing tactics including in-language social media marketing and customer loyalty programs. And you\u2019ll learn how serving these consumers in their language of choice can be the smartest move of all.<\/p>\n<\/p>\n

Stay tuned! Part 2 drops next week!<\/a><\/p>\n

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