Editor’s note: This post is sponsored by Windham Brannon, an Atlanta-based accounting firm with a strategic partnership with Hong Kong-based Fiducia Management Consultants.
Chinese giant Alibaba’s historic $25 billion IPO in the U.S. has catapulted the country’s already strong e-commerce scene even further into the international spotlight.
But for many U.S. firms, the Chinese Internet is a black box, a place filed with hackers and censors, not opportunity.
In partnership with Windham Brannon, Global Atlanta caught up with Thaddaeus Mueller of Hong Kong-based Fiducia Management Consultants to understand more about how companies can put the Chinese Internet to work for them. He argues that used properly, it represents one of the most efficient ways to reach into the wealthier segments of China’s massive population, testing their receptiveness to products before opening a physical presence. The interview below has been edited for length and clarity:
Global Atlanta: How do U.S. consumers get started marketing their products online in China? Which products are best suited?
Thaddaeus Mueller: In general, almost everything can be bought online in China, even cars! The dominant categories are cosmetics, shoes and apparel. In contrast to the U.S., books, music and DVDs are less important because they are widely available for free as counterfeits or download. iTunes, for example, does not sell music in China, only apps such as games. Similarly, travel has yet to reach the same vast significance as it has in other markets.
GA: Is e-commerce a way to begin selling into China without setting up a physical presence? How important is this, given the difficulty of setting up a foreign enterprise in China?
TM: For small to medium-sized companies, it is a great way to test the market. Launch a trial on Tmall for some insight into which products work at which price points and for which target groups. The beauty of digital marketing is that you can test a range of different options with little investment before rolling them out on a bigger scale.
Depending on your industry, it makes sense to have a local presence established in a market as important as China. Hence a dual sales strategy is strongly advisable if China represents an important market to your business. Since companies can encounter severe difficulties entering the Chinese market, teaming up with a reliable partner can facilitate your entry.
GA: How much do companies need to adapt theirs products themselves, or is it just the marketing and descriptions that need to be tweaked?
TM: Chinese consumers know what is produced in their own country and exported worldwide and are reluctant to buy products obviously “Made in China”. A product which is foreign produced, has foreign design work, or carries a foreign brand name is appealing to Chinese shoppers because they can leverage their social status with it. Some companies may have an average reputation in the US, but have achieved a luxury brand name status in China. You will have to rethink which segment your product is most suitably branded towards in China.
Companies also need to realize that China is huge and, thus, characterized by substantial regional differences, more comparable to a continent than a single country. Marketing strategies need to be tailored to meet local preferences, even online. Having a strong local partner on the ground to take over the import and marketing of your product is crucial.
GA: What are the largest social media platforms, and how do they play into the discoverability of products? In other words, do people use social media for shopping or sharing products, or do they generally keep those parts of their online lives separate?
TM: China is “always on” – the relevant target groups spend more time online compared to their American counterparts, especially on their mobile phones. But due to censorship and strongly government influenced media, people do not trust traditional advertising as much. They rely more on their friends, their peer group and key opinion leaders for information. Therefore social media has a much higher relevance in China.
However, it does not help a company much if they already have an online and social media presence in their home market because the landscape in China is unique. All the international players like Facebook, Google, Yahoo!, eBay, YouTube and Twitter have little or no relevance in China. They are either blocked or unsuccessful compared to their Chinese rivals. As a consequence, companies have to acquaint themselves with Chinese companies like Baidu, Youku,Sina Weibo, Renren and Taobao, for example.
As in the West, search engine optimization and marketing are important tools, and many Chinese search engines have no problem ranking your site higher in their search results for payment. Google, for example, would never do that but for Chinese search engines this is a legitimate source of income.
Another difference can be seen with key opinion leaders that have a big fan base on Sina Weibo (similar to Twitter). These people are generally willing to promote your products for money; something that would not work so easily in the West. If Western bloggers or celebrities would use their Twitter accounts for blunt advertising, it would probably discredit them and reflect badly on the brand.
GA: Which are the unavoidable ecommerce platforms that you need to be on?
TM: The number one e-commerce player in China is of course Alibaba, which since its ground-breaking IPO on the New York Stock Exchange has gained international fame. Alibaba’s Tmall is currently at the forefront of the e-commerce race in China, occupying over 50% of the market. With its vast reach and strong branding itself, Tmall is the perfect stepping stone into the Chinese e-commerce market.
By comparison, the e-commerce behemoth Tencent rose to fame through its gaming platforms and its messenger and social media services, QQ and WeChat (known as Weixin in China). Creating an entirely new shopping experience, WeChat users can make payments directly through the social media service.
The B2C shopping portal JD.com has positioned itself in direct competition with e-commerce giant Tmall, most notable in their choice of mascot – a dog vis-à-vis Tmall’s cat. Boasting an extensive product catalogue, a vast distribution network, flexible payment options, and an international store,JD.com received significant funding in early 2013 to expand its presence.
Thaddaeus Mueller is associate director for Fiducia Management Consultants and specializes in finding innovative solutions for clients seeking to establish and expand their business in China or Hong Kong. His organization has a strategic partnership with Atlanta-based accounting firm Windham Brannon.
