Chinese e-commerce platforms in 2021: Which is the most suitable for your brand?

Jan 05, 2022 E-commerce

 

Over the years, the Chinese e-commerce market has changed a lot, revolutionizing the traditional system for both consumers and sellers. Chinese internet giants have made a real run to become the best e-commerce platform in China through the development of cutting-edge technologies. Thanks to their efforts, the opportunities to increase sales for companies and entertainment for consumers have developed significantly.

The engine of growth in consumption is the new generation of Chinese consumers which is characterized by a motivation to spend more freely, be sophisticated consumers and use the internet daily to do any type of business from chatting to buying items.

Over the past 10 years, many e-commerce platforms have developed and improved to adapt to the demanding and ever-changing needs of Chinese consumers. In 2021 we can group the main e-commerce platforms in China into these below: Tmall, Pinduoduo, JD.com, Kaola, Little Red Book (Xiaohongshu), Vipshop, Taobao, Suning.

Some are specific to some industries, others are better for smaller or larger companies. Therefore, how can a company choose the most suitable platform for its sector and its possibilities?

Let's take a look at some of the most popular Chinese e-commerce platforms and understand their specifications.


Chinese e-commerce overview in 2021

E-commerce sales in China are on way to surpass expectations as they already reached $1.8 trillion in 2020. Back in 2017, e-commerce sales outpaced estimates by $44.41 billion, driven largely by sales from leader Alibaba's Taobao and Tmall. Those two will still have a total of 58.2% this year, but Alibaba's share is shrinking as the market diversifies with the emergence of retailers and newcomer Pinduoduo's recent success.

In 2020, according to Statista, "the revenue is expected to show an annual growth rate (CAGR 2020-2024) of 6.9%, resulting in a market volume of US$1,309,535m by 2024."

From 2015 to 2018, Alibaba's share of e-commerce sales in China fell from 77.6% to 53.5%. Alibaba's e-commerce sales are now growing slower than the overall e-commerce growth rate of 34.3% with Alibaba's sales forecast to increase just 22.8%.

In addition, the rapid expansion of cross-border e-commerce has offered opportunities for small and medium-sized enterprises to participate in world trade.

Consumption among the upper-middle-class is still growing so fast, over 17% per year, and, by 2020, has accounted for $1.5 trillion in urban China. That compares with a 5% growth rate among emerging-middle-class and middle-class consumers.

However, the emerging middle class and the middle class will remain the largest consumers in many categories, in particular rapidly evolving consumer goods such as personal care products and detergents.

 

Five key trends driving Chinese e-commerce market


1.  China e-commerce shopping festivals

E-retailers are creating more shopping festivals and themes to increase consumer engagement. For example, over 79% of consumers said they planned to participate in Double 11.

Double 11 and some shopping festivals are a key opportunity for local and international brands to leverage the enthusiasm for shopping among Chinese consumers. Chinese consumers are looking to experience, try new things, and buy products that may be new to them. These shopping festivals are a perfect opportunity for new brands to enter the Chinese market.

2. Consumption upgrade in the Chinese e-commerce sector

With the rise of disposable income, consumers are more confident in spending their money on a number of categories such as food, cosmetics, and clothing. The demand for fashion is growing much faster than other consumer demands. Middle to upper class consumers are now increasing their demand for goods that are not available domestically. For this reason, the number of Chinese online platforms and cross-border shopping sites where high-end and niche international brands are growing in popularity and are also driving the consumption updating movement. The proportion of consumers who had recently made a cross-border e-commerce purchase reached 67% in 2017, compared with only 34% in 2015. Imported goods are liked by Chinese consumers for their good quality, health and safety, and even package design. Thanks to various online platforms, such as Kaola, Tmall Global, and JD Worldwide, Chinese consumers now can have broad access to products from overseas.

3. A new form of retail: online and offline integration

Since the term "new retail"  was used by Jack Ma in 2016, it has been an important topic for manufacturers and retailers alike. This concept involved the integration of online and offline retail elements, including products, services, logistics, big data, marketing, management, and so on. Currently, in China, online players are taking the initiative to drive this integration. For example, the largest e-commerce platform in China, Alibaba recently invested $2.9 billion in China's biggest offline retail group, Sun Art. The online to offline (O2O) business model is transforming the retail industry. Both Alibaba and JD.com are also focusing on the millions of other grocery stores in China, as they believe these shops are places where consumers can be targeted to drive further penetration of payment platforms and e-commerce.

4. Digital payments are the main payment method for Chinese consumers


Alipay and WeChat Pay are the most popular online payments in China, and they are already an integral part of e-commerce platforms such as Alibaba and JD.com.

Online financial companies like Alibaba's Ant Group and JD.com's Baitiao are becoming very famous among Chinese consumers, especially millennials, due to low fees and convenient user experience. The disposable income and consumer confidence rise, is encouraging them to spend even more online. Online wallets are the top payment method, nearly 33% of Chinese shoppers use them to complete transactions. Roughly half of all China's e-commerce sales are made on mobile devices. There are dozens of mobile e-commerce platforms, but in 2017 Taobao had the most monthly active users at 253.2 million.  

5. The boom of social media and e-commerce integration in China 

Social media are the main platforms where people come to interact with one another, what's making it an ideal place to share and comment on products. As the number of mobile users rises, the importance of social media has increased. The high concentration of mobile e-commerce has accelerated the transition of the advertising ecosystem. Thus social media has become a crucial tool for marketing, especially when they are communicating and engaging with potential consumers. We have observed a trend from social media apps to turn toward e-commerce in the last few years. The three biggest social media players are WeChat, Weibo, and social network QQ Zone. They are still big but a serious competitor has emerged: Short Videos App (Douyin/TikTok or Kuaishou for instance).  

 

China e-commerce world: what opportunities does it offer to brands?


1. Why is localization so important in China?

With the development of new technologies, building a beautiful and dynamic website is not a big deal. The important thing that really matters is building a website that is relevant to your target customers.

China is a challenging market for foreign brands and Chinese netizens are difficult to please. They have a unique language, different symbolic colors, and philosophies, they face a different ecosystem and online regulations. This market is just too enormous to be ignored, so it's important to adopt the best practices to set up your e-commerce design for China that will mean taking a big step for your brand's success.

2. What are the most used e-commerce platforms in China?

- Taobao: idea incubator for Chinese e-commerce

Taobao, the most popular online shopping site in China, is a platform for small businesses and individual entrepreneurs to open online retail stores. It features a variety of items and cheap prices. In fact, the products are usually offered by small business owners, and buyers are very careful buying things. They check several aspects including the shop credit, customer satisfaction rate, and comments before making their final decision.

Alibaba-owned Taobao is unknown to the e-commerce industry. The C2C giant sells almost everything,  from pets to vehicles. Taobao owes its success as the market leader in this industry by offering free registration for its users.

The app has recently launched its affiliate program: Taoxiaopu. Taobao has rebranded itself as a platform that encouraged entrepreneurship and young designers to find their fame online instead of being the online version of a fake goods market.

- Tmall: China's e-commerce giant

Tmall, another e-commerce platform owned by Alibaba focused on B2C services. It is a virtual shopping center that hosts many international brands, such as Gucci, Calvin Klein, Burberry, and many others.

It is more high-end than Taobao and the requirement to enter as a seller is high. The idea is simple, only quality sellers are allowed. When one is ordering on Tmall, one does not have to worry about what he/she will receive. 

To operate on Tmall, a company is required by regulation to use what is called a "Tmall Partner" which is a third-party company that helps to provide assistance in onboarding and operation for businesses that are working on Alibaba’s platforms such as Tmall.

Tmall partners can be found through official lists provided through Tmall where businesses can assess the quality and reputation of various Tmall partners and choose one that fits the needs and scope of the business.

Tmall also offers a cross-border service for foreign entities that do not have a presence in China and wishes to try out the market. The requirements are still quite high. In summer 2019 however, the platform has released TOF (Tmall Oversea Fulfillment) to encourages smaller brands and give them a chance on the Chinese market.

- JD: e-commerce platform trusted by Chinese consumers

Founded in 1998, JD.com is the largest B2C online retailer in China and one of the biggest competitors to Alibaba. It provides about 400,000 new products including cell phones, home appliances, apparel, wedding events, electronics, books, and more.

It features a fast delivery service and guaranteed product quality. The main problem is it does not support instant online customer service and its customer-service phone is hard to get through.

JD offers direct sales of electronics products, general merchandise, books, home appliances, digital communications, apparel, food, and other goods.

- Little Red Book (Xiaohongshu): birth place of social e-commerce in China

Little Red Book, founded in 2013, has over 100 million monthly young users. The app combines social media and e-commerce. Little Red Book grew very fast into a forum where users post-shopping tips, including must-have products and stores frequented by local residents.

The Little Red Book app displays product photos and videos posted by users as soon as it starts up. Cosmetics, clothes, and bags come with reviews, ratings, and user backstories on purchases. People can research products and buy them through the platform.

Little Red Book is currently the most trusted social shopping platform with the main market and target audience on the app being consumers looking for fashion and luxury goods. That means that primarily women, mothers, and those interested in beauty industry content are highly concentrated demographics on the app. These users also tend to be both young and wealthy which makes them highly valuable in terms of conversion rates. The power of social influence, KOLs, and word-of-mouth marketing is the key to Little Red Book's astonishing success and growth. Users on the platform are highly interactive and engaged.

- Vipshop: a Chinese e-commerce app focused on the beauty market

Vipshop focuses on discounts and flash sales. The online retailer partners with over 1,000 brands to bring certain amounts of items at a lower price for consumers. The site mainly covers clothing and electronics. It was one of very few Chinese tech stocks to list in the US this year.

- Suning: online place to sell electronic in China

Suning is one of the largest non-government retailers in China, headquartered in Nanjing, Jiangsu Province. Suning's e-commerce platform categories include physical merchandise, such as home appliances, 3C products, books, general merchandise, household commodities, cosmetics, and baby care products, content products, and service merchandise.

Suning Commerce Group Co., Ltd. principally operates franchised retail shops of electronics appliances in China. The company mainly offers color televisions (TVs), audio and video (AV) players, disc players, refrigerators, washing machines, digital and information technology (IT) products, small household electronics, air conditioners, telecommunications products, and other products. The company also provides installation and repair services for electronic appliances.

- Kaola: The biggest Chinese cross-border e-commerce platform

Kaola has grown by establishing a reputation for featuring reliable, genuine products on its site. It maintains quality by setting up purchasing teams in foreign cities such as Tokyo and tries to keep prices down by negotiating directly with manufacturers.

In a reliability survey of cross-border e-commerce companies in the first half of 2017 conducted by China's iiMedia Research, Kaola topped the ranking, followed by Amazon and Xiaohongshu. Kaola was bought by Alibaba in 2019 for $2 billion. Alibaba intends to allow Kaola to continue operating under its current branding but will inject some additional resources to improve the consumer experience on the platform. This acquisition also has plans to grow Kaola as a cross-border-e-commerce giant to rival other platforms such as Tmall Global and JD Worldwide.

Kaola was bought by Alibaba in 2019 for $2 billion. Alibaba intends to allow Kaola to continue operating under its current branding but will inject some additional resources to improve the consumer experience on the platform. This acquisition also has plans to grow Kaola as a cross-border e-commerce giant to rival other platforms such as Tmall Global and JD Worldwide.

- Pinduoduo, the most innovative Chinese social e-commerce platform

If none compare to Alibaba and Taobao yet, a platform has been growing in the shadow of third and fourth-tier cities and slowly eating some of Taobao’s market share.

This platform is Pinduoduo. An app that works with rival giant Tencent and that is promoting social e-commerce. We will talk about it later in the post, don't miss out.

In the summer of 2019, many things happened in the Chinese e-commerce world, including Pinduoduo beating JD.com as the second-largest e-commerce platform behind Tmall. For years, Pinduoduo has been focusing on smaller Chinese cities by offering the best deal and the possibility for users to work and in hand to get items at a bulk price.

2019 was the time for Pinduoduo to walk in Taobao's footsteps and show what it was capable of. Not only does the app work directly with suppliers reducing the cost of sold items but it has focused on affiliation working hand in hand with Wechat.

Pinduoduo buyers can get discounts, gifts, and even free items by promoting, sharing links, and pushing people to register on Pinduoduo. This affiliation program worked so well that Taobao's later launched its own affiliation program know as Taoxiaopu.

3.  To sum up on Chinese e-commerce apps:

We love the current dynamic in the Chinese e-commerce world. Because the platforms are racing to be the most attractive to customers and brands, we see the development of new marketing tools that are full of opportunities. This race not only means more tools for sellers and buyers but also relaxed requirements to register on these platforms. Believe me, it used to be challenged.

With the development of new technology, one seems to overshadow the rest: Video and live streaming by KOLs has of course a huge impact on sales conversion but short video ads are also part of the game with unicorn app such as Douyin.

Other platforms like Meituan, JD, Vipshop, Tmall, Ele.me, and DianPing all play an active role in the market, but none are nearly as popular as Taobao in terms of active monthly users.

This is an article from Gentlemen Marketing Agency.