Where to start as an DTC brand in the Chinese e-commerce market

There is no shortage of financial gurus that predict China’s economy will soon overtake the US. Whether or not that prediction comes true, China still has the world’s largest eCommerce economy making it an attractive and highly lucrative market for boutiq

Date:2020-07-23 by GLOSKU

Where to start as an DTC brand in the Chinese e-commerce market

There is no shortage of financial gurus that predict China’s economy will soon overtake the US. Whether or not that prediction comes true, China still has the world’s largest eCommerce economy making it an attractive and highly lucrative market for SMBs - most notably DTC brands.

There are already numerous tried and tested SaaS solutions working for direct-to-consumer (DTC) and boutique brands that are successfully penetrating the Chinese E-Comm industry. 

Many of the SMBs found on these platforms are from the US, Australia, and Europe. They are making use of modern supply chain channels and local marketing offered on SaaS mobile and desktop apps purely developed to enable brands from overseas to create an extension of their e-shops in China.

SaaS platforms effectively break down many of the barriers to entry into China. By using localized marketing techniques such as ‘social commerce’ and ‘decentralized sales’ (proven to work by already successful Chinese DTC brands), while eradicating the lion’s share of investment costs - SMBs can quickly and effortlessly reach Chinese consumers using cost-effective solutions.

Why Should DTC Brands Target China?

China’s eCommerce market is worth $1.11 trillion according to Statista.com, and it is the fourth fastest-growing industry sector in the country just trailing solar power, internet services, and online gaming. On top of this, between 2020 and 2024 this economy will grow 8.7% per annum and will be worth $1.56 trillion by 2024.

The key niche within the eCommerce sector leading the eCommerce race is ‘fashion’ which is worth a staggering $42 billion. Between 2017 and 2020 the eCommerce fashion niche has grown a staggering 325% and there is no sign of this growth rate slowing. 

Part of the rise in fashion sales is because Chinese consumers are becoming more sophisticated when it comes to being fashionable. The new fad is to hunt down boutique brands with the aim of differentiating. This is rather than hunting down Gucci or Louis Vutton products, which are now considered common brands and have both partially lost their unique appeal.

Today, Chinese consumers are demanding fashionable brands that are trendy but unique, and there is an army of SaaS apps leading the way connecting overseas boutique brands to the Chinese e-comm market.

For example, The current sneaker trend in China is known as the “Chinese Sneaker Mania” phenomenon. The youth of China are using smartphone apps such as Poizon and Nice to trade brand new sneakers, pushing up the price of sneakers far beyond the original retail price. 

Another popular sneakers trading platform is GOAT where boutique brands such as Air Jordans, Comme Des garcons, Chinatown Market, and Alexander McQueen sneakers are popular amongst Chinese youth. While Farfetch and Net-A-Porter SaaS platforms connecting Chinese consumers to boutique brands are also established in the Chinese e-comm market. 

Right now it is the perfect time for DTC and boutique brands from Australia, the US, and Europe to find legitimate ways to start their own SMB brand in China.

What Barriers to Entry Do SMB Brands Need To Overcome?

In the US, DTC brands such as Rothy, Musier, and Cuyana are recording record profits and there are many others like them changing the way consumers make online purchases. These brands often have a lot of organic traffic from search engines and social media leading to their flagship e-shop in their home countries.

However, when it comes to replicating these DTC and boutique brands in China, it is a different ball game altogether. Many of the top western brands have already tried to penetrate the Chinese market and gone as far as investing millions, without success.

In many cases, their localized strategies are often not applicable in China leaving them with very little exposure to Chinese consumers and forcing a quick retraction as they exit the market with their tails in between legs.

Some of the issues that they have come against include:

·        trouble converting them due to language

·        checkout issues such as currency

·        the speed at which the site loads in China

·        brands may not show up on Chinese search engines

·        duty tax, regulation, and import restrictions

·        high investment and marketing costs

How Can SMBs Overcome These Barriers To Entry

The most cost-effective way to penetrate the Chinese eComm market is to reduce the cost of entry into the market in the first place which is where SaaS systems are helping.

Most large brands have either turned down the opportunity to move into the Chinese market because the risk is too high or they simply pulled the plug because they didn’t want to continue ploughing in more cash to stick around to see if their plan would work.

What if there was a way for SMBs to reduce these costs and test the waters with less investment intensive options versus other eComm options such as Tmall, JD, Kaola, or RED with no need to store inventory or do major marketing campaigns?

GLOSKU’s platform does exactly this. It is a low cost way for DTC brands to establish a presence in the Chinese e-comm economy. E-comm stores can connect to GLOSKU and have their products automatically show up in China with product descriptions in Maderin, Cantonese, or English and prices as well as check out shopping carts that use Chinese Yuan. 

What’s more is that supply chain channels are already set up, so when a Chinese consumer makes an order, e-comm stores can follow their standard shipping processes without worrying about hold ups due to duty or taxes.

In addition, the GLOSKU platform has built in tools that assist brands in making sales. Local entrepreneurs use social commerce on platforms such as the Wechat platform. This means  brands on the GLOSKU platform get untapped access and are able to establish a mobile app existence in China on the Wechat platform that boasts 1 billion users within minutes.

This is just one of many decentralized marketing techniques used by social commerce marketers in the country. They use 2D codes for special offers, links to boutique brand products, and group chats to endorse brands and stir up hype which inevitably leads to sales. This is something most US and European SMBs are unable to master but GLOSKU solves the dilemma by using what is effectively a local sales team with localized knowledge.

Weighing up the GLOSKU platform, it is the ideal way for DTC brands to test the waters and see if their product will be accepted within a huge Chinese consumer market. It breaks down the major barriers to entry such as localized marketing, supply chain issues, cost of keeping an inventory, and language barriers giving SMBs streamlined access to the world’s biggest e-comm economy with very little effort!